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No. 1733 March 10, 2004 This paper, in its entirety, can be found at: www.heritage.org/research/budget/bg1733.cfm Produced by the Thomas A. Roe Institute for Economic Policy Studies Published by The Heritage Foundation, 214 Massachusetts Ave., NE, Washington, D.C. 20002–4999 (202) 546-4400 heritage.org Nothing written here is to be construed as necessarily reflecting the views of The Heritage Foundation or as an attempt to aid or hinder the passage of any bill before Congress. How to Get Federal Spending Under Control Brian M. Riedl Following a multi-year spending spree that pushed federal spending above $20,000 per household and the budget deficit up to nearly $500 billion, lawmakers are finally seeking ways to control federal spending. President George W. Bush’s 2005 budget provides a positive first step by proposing to freeze most non-security discretion- ary spending at 2004 levels. Reducing federal spending is extraordinarily dif- ficult. Even the most wasteful programs are pas- sionately supported by armies of recipients, administrators, and lobbyists. Yet avoiding these difficult decisions only makes the problem worse. The baby boomers will soon collide with Social Security and Medicare to produce a sea of red ink, leading to a near doubling of all taxes or the termi- nation of most federal programs. Lawmakers need to get spending under control immediately while laying the groundwork for comprehensive Social Security and Medicare reforms. Five Steps. If they are serious about controlling spending, lawmakers should take the following five steps: 1. Stop digging. Federal spending is growing at its fastest rate since the 1960s, but many of the same lawmakers that are calling for spending restraint also support legislation to expand highway spending by 72 percent, increase spe- cial education spending by 151 percent, and once again extend unemployment benefits. Each of these spending increases will dig the United States deeper into its financial hole and necessitate even more difficult choices later. Lawmakers should cut spending now . 2. Balance the budget by 2014 without raising taxes. Budget deficits are merely a symptom of two larger problems: a sluggish economy and runaway spending. Restoring economic growth requires low tax rates, and runaway spending is the most dangerous threat to pro-growth tax relief. Balancing the budget with spending cuts will improve the country’s ability to deal with the massive Social Security and Medicare lia- bilities that will come due when the baby boomers retire. 3. Freeze discretionary spending in 2005. Dis- cretionary spending leaped 39 percent between 2001 and 2004. Even after excluding defense and costs related to September 11, dis- cretionary spending is rising 7 percent annu- ally. Do these agencies need yet another spending increase this year? Congress and the President should do what millions of families do: set priorities and balance each high-prior- ity spending increase with a low-priority spending cut. 4. Reform entitlements. Spending cannot be restrained without reforming entitlements, which comprise two-thirds of all federal spending and threaten the country’s long-term finances. These programs are projected to grow by 6 percent annually for the next decade—a
Transcript of How to Get Federal Spending Under Controls3.amazonaws.com/thf_media/2004/pdf/bg1733.pdf · spending...
No. 1733March 10, 2004
This paper, in its entirety, can be found at: www.heritage.org/research/budget/bg1733.cfm
Produced by the Thomas A. Roe Institute for Economic Policy Studies
Published by The Heritage Foundation, 214 Massachusetts Ave., NE, Washington, D.C. 20002–4999
(202) 546-4400 heritage.org
How to Get Federal Spending Under Control
Brian M. Riedl
Following a multi-year spending spree thatpushed federal spending above $20,000 perhousehold and the budget deficit up to nearly$500 billion, lawmakers are finally seeking ways tocontrol federal spending. President George W.Bush’s 2005 budget provides a positive first step byproposing to freeze most non-security discretion-ary spending at 2004 levels.
Reducing federal spending is extraordinarily dif-ficult. Even the most wasteful programs are pas-sionately supported by armies of recipients,administrators, and lobbyists. Yet avoiding thesedifficult decisions only makes the problem worse.The baby boomers will soon collide with SocialSecurity and Medicare to produce a sea of red ink,leading to a near doubling of all taxes or the termi-nation of most federal programs. Lawmakers needto get spending under control immediately whilelaying the groundwork for comprehensive SocialSecurity and Medicare reforms.
Five Steps. If they are serious about controllingspending, lawmakers should take the followingfive steps:
1. Stop digging. Federal spending is growing atits fastest rate since the 1960s, but many of thesame lawmakers that are calling for spendingrestraint also support legislation to expandhighway spending by 72 percent, increase spe-cial education spending by 151 percent, andonce again extend unemployment benefits.Each of these spending increases will dig theUnited States deeper into its financial hole andnecessitate even more difficult choices later.Lawmakers should cut spending now.
2. Balance the budget by 2014 without raisingtaxes. Budget deficits are merely a symptom oftwo larger problems: a sluggish economy andrunaway spending. Restoring economic growthrequires low tax rates, and runaway spendingis the most dangerous threat to pro-growth taxrelief. Balancing the budget with spending cutswill improve the country’s ability to deal withthe massive Social Security and Medicare lia-bilities that will come due when the babyboomers retire.
3. Freeze discretionary spending in 2005. Dis-cretionary spending leaped 39 percentbetween 2001 and 2004. Even after excludingdefense and costs related to September 11, dis-cretionary spending is rising 7 percent annu-ally. Do these agencies need yet anotherspending increase this year? Congress and thePresident should do what millions of familiesdo: set priorities and balance each high-prior-ity spending increase with a low-priorityspending cut.
4. Reform entitlements. Spending cannot berestrained without reforming entitlements,which comprise two-thirds of all federalspending and threaten the country’s long-termfinances. These programs are projected to growby 6 percent annually for the next decade—a
Nothing written here is to be construed as necessarily reflecting the views of The Heritage Foundation or as an attempt to aid or hinder
the passage of any bill before Congress.
No. 1733 March 10, 2004
rate that would make it nearly impossible tobalance the budget by 2014. Lawmakers seek-ing to rein in spending should put all entitle-ment spending on the table, including the 2003Medicare drug bill and the 2002 farm bill.
5. Fix the budget process. Lawmakers still clingto a budget process created in 1974. Over thepast 30 years, successive Congresses havepunched this process full of holes, and federalspending has correspondingly tripled. The cur-rent budget process provides no workable toolsto limit spending, no restrictions on passingmassive costs onto future generations, and noincentive to bring all parties to the table early inthe budget process to set a framework.
Common Traps. As lawmakers work to bringfederal spending under control, they should avoidthe following common traps:
• Expecting an economic boom to balance thebudget. While recent tax cuts will likely aideconomic growth and bring in new tax reve-nues, it is unrealistic to expect tax revenues togrow at the 9 percent annual rate necessary tobalance the budget by 2014 under currentspending trends. Balancing the budget requiresspending restraint.
• Increasing spending through accounting gim-micks. Lawmakers tried to hide the 2004spending increases by shifting budget authoritybetween years, which is Congress’s equivalent ofbackdating its checks. These accounting gim-
micks could not cover up the 9 percent increasein projected discretionary outlays for 2004.Lawmakers are already discussing gimmicks tosubstantially increase spending this year, whichwould worsen the nation’s fiscal situation.
• Making only the easy spending cuts. Law-makers often reject any spending cut that couldoffend someone. Yet every dollar governmentspends—no matter how wasteful—is receivedby someone who would be angry to lose thesebenefits. Every spending cut will offend some-body, and any easy cuts surely would have beenmade by now. Lawmakers who are seriousabout cutting spending should focus on themillions of taxpayers—both current andfuture—who are forced to sacrifice their finan-cial well-being in order to fund ineffective fed-eral programs.
Priority Budgets. In 2004, national defense,homeland security, and entitlement challengesmake spending reform more important than ever. Itis time to step back and think about the role of gov-ernment, the obligations of the private sector, andthe delineation between federal and state responsi-bilities.
—Brian M. Riedl is Grover M. Hermann Fellow inFederal Budgetary Affairs in the Thomas A. Roe Insti-tute for Economic Policy Studies at The Heritage Foun-dation. Heritage Foundation research assistant KeithMiller contributed to this paper.
No. 1733March 10, 2004
This paper, in its entirety, can be found at: www.heritage.org/research/budget/bg1733.cfm
Produced by the Thomas A. Roe Institute for Economic Policy Studies
Published by The Heritage Foundation214 Massachusetts Ave., NE
Washington, DC 20002–4999(202) 546-4400 heritage.org
Talking Points• Steep increases in federal spending over
the past few years threaten families’ eco-nomic security. Higher spending eventu-ally leads to higher taxes and lowereconomic growth rates.
• With the nation in a deep financial hole,lawmakers’ first priority should be to stopdigging. Current legislation to steeplyincrease highway, education, and unem-ployment spending would necessitateeven more painful choices later.
• Lawmakers should freeze 2005 discre-tionary spending at its 2004 level andbalance high-priority spending increaseswith low-priority program eliminations.
• Without reform, Medicare and SocialSecurity costs will soon overwhelm therest of the federal budget and force eithermassive tax increases or the eliminationof most other federal programs.
• Bringing spending under control willrequire difficult decisions. All federal pro-grams should be on the table.
How to Get Federal Spending Under Control
Brian M. Riedl
Following a multi-year spending spree that pushedfederal spending above $20,000 per household andthe budget deficit up to nearly $500 billion, lawmak-ers are finally seeking ways to control federal spend-ing. President George W. Bush’s 2005 budget providesa positive first step by proposing to freeze most non-security discretionary spending at 2004 levels.
Reducing federal spending is extraordinarily diffi-cult. Even the most wasteful programs are passionatelysupported by armies of recipients, administrators, andlobbyists. Yet avoiding these difficult decisions onlymakes the problem worse. The baby boomers willsoon collide with Social Security and Medicare to pro-duce a sea of red ink, leading to a near doubling of alltaxes or the termination of most federal programs.Lawmakers need to get spending under control imme-diately while laying the groundwork for comprehen-sive Social Security and Medicare reforms.
If they are serious about controlling spending, law-makers should take the following five steps:
1. Stop digging. Federal spending is growing at itsfastest rate since the 1960s, but many of the samelawmakers that are calling for spending restraintalso support legislation to expand highway spend-ing by 72 percent, increase special educationspending by 151 percent, and once again extendunemployment benefits. Each of these spendingincreases will dig the United States deeper into itsfinancial hole and necessitate even more difficultchoices later. Lawmakers should cut spending now.
Nothing written here is to be construed as necessarily reflecting the views of The Heritage Foundation or as an attempt to aid or
hinder the passage of any bill before Congress.
No. 1733 March 10, 2004
Chart 1 B 1733
Source: Heritage Foundation calculations based on data from the Office of Management and Budget and the U.S. Census Bureau.
Washington Now Spends More Than $20,000 per Household
16,000
17,000
18,000
19,000
20,000
$21,000
1991 1993 1995 1997 1999 2001 2003
Fiscal Year
Real spending per household in 2003 dollars
2. Balance the budget by 2014without raising taxes. Budgetdeficits are merely a symptom oftwo larger problems: a sluggisheconomy and runaway spend-ing. Restoring economic growthrequires low tax rates, and run-away spending is the most dan-gerous threat to pro-growth taxrelief. Balancing the budget withspending cuts will improve thecountry’s ability to deal with themassive Social Security andMedicare liabilities that will comedue when the baby boomersretire.
3. Freeze discretionary spendingin 2005. Discretionary spendingleaped 39 percent between 2001and 2004. Even after excludingdefense and costs related to Sep-tember 11, discretionary spend-ing is rising 7 percent annually. Do theseagencies need yet another spending increase thisyear? Congress and the President should dowhat millions of families do: set priorities andbalance each high-priority spending increasewith a low-priority spending cut.
4. Reform entitlements. Spending cannot berestrained without reforming entitlements,which comprise two-thirds of all federal spend-ing and threaten the country’s long-termfinances. (See Chart 2.) These programs are pro-jected to grow by 6 percent annually for the nextdecade. Table 1, which displays the spendingrestraint needed to balance the budget by 2014,shows that all scenarios to balance the budget by2014 require reducing the 6 percent annualgrowth rate of mandatory spending. Lawmakersseeking to rein in spending should put all enti-tlement spending on the table, including the2003 Medicare drug bill and the 2002 farm bill.
5. Fix the budget process. Lawmakers still clingto a budget process created in 1974. Over thepast 30 years, successive Congresses havepunched this process full of holes, and federalspending has correspondingly tripled. The cur-rent budget process provides no workable toolsto limit spending, no restrictions on passing
massive costs onto future generations, and noincentive to bring all parties to the table early inthe budget process to set a framework. The Fam-ily Budget Protection Act, authored by Represen-tatives Jeb Hensarling (R–TX), Paul Ryan (R–WI), Chris Chocola (R–IN), and ChristopherCox (R–CA), provides a comprehensive proposalfor creating a budget process that reflects Amer-ica’s budget priorities and should be closelyexamined by anyone interested in budgetreform.
As lawmakers work to bring federal spendingunder control, they should avoid the following com-mon traps:
• Expecting an economic boom to balance thebudget. While recent tax cuts will likely aid eco-nomic growth and bring in new tax revenues, itis unrealistic to expect tax revenues to grow atthe 9 percent annual rate necessary to balancethe budget by 2014 under current spendingtrends. Balancing the budget requires spendingrestraint.
• Increasing spending through accounting gim-micks. Lawmakers tried to hide the 2004 spend-ing increases by shifting budget authority betweenyears, which is Congress’s equivalent of backdat-ing its checks. These accounting gimmicks could
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No. 1733 March 10, 2004
Table 1 B 1733
When the Budget Would Reach Balance
A) Assuming dynamic scoring of tax revenues
7%6%
Annual 5% 2012 2013mandatory 4% 2011 2011 2012 2014spending 3% 2010 2011 2011 2012 2013increase 2% 2009 2010 2011 2011 2012 2012
1% 2009 2009 2010 2010 2011 2011 20120% 2008 2008 2009 2009 2010 2011 2012 2013
0% 1% 2% 3% 4% 5% 6% 7%
B) Assuming static scoring of tax revenues
7%6%
Annual 5%mandatory 4% 2012 2013spending 3% 2011 2012 2013 2014increase 2% 2010 2010 2011 2012 2014
1% 2009 2009 2010 2011 2012 20130% 2008 2008 2009 2010 2011 2012 2014
0% 1% 2% 3% 4% 5% 6% 7%
Note: Both scenarios assume enactment of the President's tax proposals, including Alternative Minimum Tax Reform, through 2014.
Source: See Brian M. Riedl, "Balancing the Budget Within 10 Years: A Menu of Options," Heritage Foundation Backgrounder No. 1726, February 13, 2004, at www.heritage.org/Research/Budget/bg1726.cfm.
Annual discretionary spending increase
Annual discretionary spending increase
Chart 2 B 1733
Source: Heritage Foundation calculations based on the Congressional Budget Office, "Long-Term Budget Outlook," December 2003, at www.cbo.gov/showdoc.cfm?index=4916&sequence=0. This chart refers to CBO's intermediate spending and low tax scenario.
Social Security and Medicare Costs Are About to Explode
Other SpendingSocial Security, Medicare & Net Interest
5
10
15
20
25
30
35%
2002 2006 2010 2014 2018 2022 2026 2030 2034 2038 2042 2046 2050
Fiscal Year
Spending as a percent of GDP
No. 1733 March 10, 2004
Table 2 B 1733
Spending Category 2001 2004 Amount Percentage Avg. Annual
Social Security $432,958 $496,174 $63,216 15% 4.6%
National Defense 305,500 453,684 148,184 49% 14.1%
Medicare 217,384 270,451 53,067 24% 7.5%
Various Income Security Programs 152,640 195,006 42,366 28% 8.5%
Medicaid 129,374 177,282 47,908 37% 11.1%
Federal Employee Retirement & Disability 80,972 89,295 8,323 10% 3.3%
Other Health Programs 42,896 66,219 23,323 54% 15.6%
Education 35,203 62,362 27,159 77% 21.0%
Veterans Benefits 45,039 60,454 15,415 34% 10.3%
Unemployment Benefits 30,242 48,287 18,045 60% 16.9%
Highways & Mass Transit 35,804 42,789 6,985 20% 6.1%
Justice Administration 30,205 41,603 11,398 38% 11.3%
International Affairs 16,493 34,236 17,743 108% 27.5%
General Government 14,259 25,424 11,165 78% 21.2%
Community & Regional Development 11,773 18,757 6,984 59% 16.8%
Other Spending and Undist. Offsetting Receipts 76,860 80,547 3,687 5% 1.6%
Net Interest 206,168 156,264 -49,904 -24% -8.8%
Total Spending 1,863,770 2,318,834 455,064 24% 7.5%
Note: All amounts in millions of dollars.Source: Heritage Foundation calculations based on data from the Office of Management and Budget.
2001-2004 IncreaseTotal Outlays
Spending Is Increasing Across Government
not cover up the 9 percentincrease in projected dis-cretionary outlays for2004. Lawmakers arealready discussing aninnovative gimmick toincrease domestic spend-ing in 2005: funding alarge domestic spendingincrease by taking themoney out of defense,knowing that an under-funded defense budgetcan be remedied later bysubstantially adding to thePresident’s planned 2005supplemental defense bill.If lawmakers insist onthese gimmicks, spendingcould again grow rapidly.
• Making only the easyspending cuts. Lawmak-ers often reject any spending cut that couldoffend someone. Yet every dollar governmentspends—no matter how wasteful—is receivedby someone who would be angry to lose thesebenefits. Every spending cut will offend some-body, and any easy cuts surely would have beenmade by now. Lawmakers who are seriousabout cutting spending should focus on themillions of taxpayers—both current andfuture—who are forced to sacrifice their finan-cial well-being in order to fund ineffective fed-eral programs.
Belt-Tightening Budgets Versus Priority Budgets
Following several “expansion budgets,” PresidentBush has moved the debate in a more responsibledirection by proposing a “belt-tightening budget”that asks most agencies to accept a near-freeze indiscretionary spending. But would most familiestrying to cut costs simply freeze each expenditureequally? Or would they fully fund priorities likefood, the mortgage payment, and insurance whilecompletely eliminating unaffordable luxuries suchas vacations and entertainment?
Most families would choose this “priority bud-get” over a “belt-tightening budget,” and so should
government. A priority budget would ask lawmak-ers to fully fund a few top priorities, such asdefense, homeland security, and a few domesticprograms, and then terminate such unaffordableluxuries as the approximately $60 billion in corpo-rate welfare spending; the $20 billion pork-projectbudget; $100 billion (at least) in waste, fraud, andabuse; and hundreds of ineffective, outdated, andunnecessary programs.
Belt-tightening budgets are certainly preferableto the expansion budgets of the past few years.However, reducing a program’s funding withoutcorrespondingly adjusting its structure, goals, andduties can lead to ineffective government. Better afew vital activities performed well than a multitudeof activities performed poorly.
President Bush proposes terminating 65 pro-grams at a savings of $4.9 billion. (See Appendix1.) Although a step in the right direction, theselow-priority terminations represent only 0.2 per-cent of all federal spending. By contrast, a prioritybudget would:
• Fully fund a limited number of high-priorityspending categories, such as defense and home-land security;
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No. 1733 March 10, 2004
• Terminate entire categories of lower-priorityprograms, such as corporate welfare;
• Institute a moratorium on pork projects;
• Limit non-security spending increases to pro-grams that pass their audits; and
• Substantially reform programs growing atunsustainable rates, such as Social Security andMedicare.
Time to be BoldCongress last attempted to enact a priority bud-
get in 1995 and 1996, when the 104th Congressterminated several programs whose irrelevance wasproven by how quickly they were forgotten. ButCongress then committed several strategic errors,such as overreaching and shutting down the federalgovernment in 1995. After President Bill Clintondeftly exploited these mistakes, budget cuttersoverreacted to Clinton’s tactics by completely aban-doning the mission of smaller government. By1998, federal spending was growing once again as aparalyzed Congress decided that budget confronta-tions with the Clinton White House could never bewon and should be avoided at all costs.
In 2004, national defense, homeland security,and entitlement challenges make spending reformmore important than ever. It is time to step backand think about the role of government, the obliga-tions of the private sector, and the delineationbetween federal and state responsibilities. For thoseinterested in lean, effective government with lowtaxes, the following are 10 guidelines for gettingspending under control.
GUIDELINE #1: Build a constituency for limited government and lower taxes.
Interest groups are always ready to defend theirspecial-interest subsidies. Taxpayers rarely fightwasteful spending because they do not believe theywill ever see the savings. Policymakers can organizetaxpayers in opposition to wasteful spending bylinking specific reforms and spending reductions tospecific tax cuts, such as legislation to:
• Terminate corporate welfare and use the sav-ings for capital gains and business tax cuts;
• Reduce outdated and duplicative programs anduse the savings to reduce income taxes acrossthe board;
• Privatize federal corporations by offering cur-rent public employees stock options at below-market prices;
• Commercialize air traffic control duties andprivatize airports, targeting the savings to airlinesecurity; and
• Devolve programs to states while alleviatingfederal mandates and reducing federal taxes.
Using the military base closing commission as amodel, Congress should create an independentcommission that would present Congress with a listof all duplicative, wasteful, outdated, and failedprograms that should be eliminated, and earmarkall savings to an immediate across-the-boardincome tax cut.1 To prevent Members from preserv-ing their own special-interest programs, the legisla-tion should not be amendable. When faced with aclear decision between funding outdated govern-ment programs and reducing the tax burden, mosttaxpayers would encourage their representatives tolet them keep more of their own money.
GUIDELINE #2: Turn local programs back to the states.
Only the federal government can handle nationaldefense, international relations, and the administra-tion of federal laws. But why should politicians inWashington decide which roads are built in Apple-ton, Wisconsin? Or which community develop-ment projects are funded in St. Louis, Missouri? Orhow education dollars are spent in Cheyenne, Wyo-ming?
The federal government taxes families, subtractsa hefty administrative cost, and then sends theremaining tax revenues back to the state and localgovernmentswith specific rules dictating howthey may and may not spend the money. In thatsense, the federal government is merely an expen-sive middleman, contributing little more than med-dling mandates that constrain the flexibility that
1. During the 108th Congress, Senator Sam Brownback (R−KS) introduced S. 837 and Representative Todd Tiahrt (R−KS) intro-duced H.R. 3213 to establish such a commission.
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No. 1733 March 10, 2004
state and local governments need to address theirown issues creatively.
No distant bureaucrat in Washington, D.C., canknow which policies are best for every state andlocality. One-size-fits-all federal mandates rarely suc-ceed as well as flexible programs designed by stateand local officials who are closer to the peopleaffected. Moreover, legislators have little incentive todesign programs that work beyond their home con-stituencies.
State and local governments, which often con-sider federal grants “free money,” also lack sufficientincentives to spend this money well because theydid not have to extract the taxes themselves. (Manyseem to forget the high federal taxes that local resi-dents paid for this “free money.”) Consequently,local officials rarely object to federal grants forunnecessary projects.
Few local governments, for example, would con-sider taxing their own residents to fund the follow-ing pork-barrel projects found in the 2004 federalbudget:2
• $725,000 for the Please Touch Museum in Phila-delphia, Pennsylvania;
• $200,000 for the Rock & Roll Hall of Fame inCleveland, Ohio;
• $150,000 for a single traffic light in BriarcliffManor, New York;
• $100,000 for the International Storytelling Cen-ter in Jonesborough, Tennessee;
• $500,000 for the Montana Sheep Institute; and
• $50 million to construct an indoor rainforest inCoralville, Iowa.
The federal government can promote accountabil-ity, flexibility, and local control by eliminating manyof the mandates on how state and local governmentsaddress their own issues and letting them raise theirown revenues and create their own programs with-out meddling Washington bureaucrats and politi-cians. Specifically, Congress should:
• Turn back the federal gas tax, as well as all fed-eral highway and mass transit spending, to thestates (2004 spending: $37 billion, discretion-ary);3
• Devolve federal housing programs to state andlocal governments and cut federal strings onhow the programs are operated ($31 billion, dis-cretionary);
• Send job training programs back to the states($5,600 million, discretionary);
• Transfer economic development programs (e.g.,Community Development Block Grants, theAppalachian Regional Commission, the DenaliCommission, and the Tennessee Valley Author-ity) back to the regions that best know how toaddress their local economies ($5,952 million,discretionary);
• Devolve Bureau of Reclamation and Army Corpsof Engineers projects to state and regionalauthorities ($5,614 million, discretionary);
• Allow states flexibility and control over theirown education programs;
• Send the Superfund program to the states andallow local flexibility in deciding how to cleancontaminated sites ($1,108 million, discretion-ary);
• Turn back law enforcement grant programs tothe states ($3,041 million, discretionary);
2. For more examples of pork-barrel spending, see Brian Riedl, “Another Omnibus Spending Bill Loaded with Pork,” Heritage Foundation WebMemo No. 377, December 2, 2003, at www.heritage.org/Research/Budget/wm377.cfm. See also Ronald Utt and Christopher Summers, “Can Congress Be Embarrassed into Ending Wasteful Pork-Barrel Spending?” Heritage Foundation Backgrounder No. 1527, March 15, 2002, at www.heritage.org/Research/Budget/BG1527.cfm.
3. Where applicable, the 2004 outlays and classification—mandatory or discretionary—are listed for each program recom-mended for reform. Discretionary programs, such as defense, are appropriated annually by Congress. For most mandatory pro-grams, such as Social Security, lawmakers set eligibility and benefit levels, and the spending totals are determined by the number of participants. Note that implementing a given recommendation may not immediately save this outlay amount, as reforms may take a few years to work through the system. Furthermore, privatization savings may depend on asset sales or whether the government contracts with the private sector to perform the privatized activity. Some recommendations overlap, so adding up all savings in this paper may overstate the potential savings of these proposals.
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No. 1733 March 10, 2004
• Devolve the Natural Resources ConservationService to the states ($3,046 million, discretion-ary);
• Transfer the Institute of Museum Services andLibrary Sciences to the states ($262 million,discretionary);
• Devolve Youth Opportunity Grants to localgovernments ($40 million, discretionary);
• Send the Neighborhood Reinvestment Corpo-ration to the cities it affects ($114 million, dis-cretionary); and
• Eliminate the practice of earmarking federalfunds for local projects.
GUIDELINE #3: Privatize activities that could be performed better by the private sector.
Over the past two decades, nations across theglobe have reaped the benefits of privatization,which empowers the private sector to carry outfunctions that had been performed by government.In the 1980s, British Prime Minister MargaretThatcher saved taxpayers billions of dollars andimproved the British economy by privatizing utili-ties, telecommunications, and airports. Morerecently, the former Soviet republics and Chinahave seen the promise of privatization. The UnitedStates, however, has been uncharacteristically timidin recent years.
There is little economic justification for the gov-ernment to run businesses that the private sectorcan run itself. Even when there is a compelling rea-son for government to regulate or subsidize busi-nesses, it can do so without seizing ownership ofthem. Government failures are often larger thanmarket failures, and anyone who has dealt with thepost office, lived in public housing, or visited alocal department of motor vehicles understandshow wasteful, inefficient, and unresponsive govern-ment can be.
Furthermore, government ownership crowds outprivate companies and encourages protected enti-ties to take unnecessary risks. After promising prof-its, government-owned businesses frequently losebillions of dollars, leaving the taxpayers to foot thebill.
Entrenched opposition to privatization, whichcomes mostly from interest groups representinggovernment monopolies, has been overcome else-where by (1) working with government unions andrelevant interest groups to design privatization pro-posals, (2) offering low-cost stock options to cur-rent employees, and (3) ensuring a transparent,open bidding process.
Candidates for privatization are numerous.4
Congress should:
• Sell the remaining Power Marketing Adminis-trations through a stock offering (2004 spend-ing: $155 million, discretionary);5
• Require that the Corporation for Public Broad-casting fund itself as all other television net-works do ($437 million, discretionary);
• Privatize the Saint Lawrence Seaway Develop-ment Corporation ($14 million, discretionary);
• Allow government agencies to accept bids ongovernment printing jobs instead of having touse the Government Printing Office (GPO)($130 million, discretionary);
• Shift the National Agricultural Statistics Serviceto the private sector ($124 million, discretion-ary);
• Sell Amtrak through a stock offering ($1,334million, discretionary);
• Privatize the next-generation high-speed railprogram ($27 million, discretionary);
• Turn over the foreign market development pro-gram to the assisted industries ($24 million,mandatory);
• Privatize ineffective applied research programsfor energy conversation research, fossil fuels,
4. Many of these policy proposals, as well as others throughout this paper, were inspired by Scott Hodge and John Barry, “How Washington Wasted Your Money in the 1995 Appropriations Bills,” Heritage Foundation Backgrounder No. 1008, October 28, 1994.
5. Unless otherwise noted, all amounts listed after each program refer to the estimated 2004 outlays. This is not necessarily the amount that would be immediately saved from enacting the recommendation. See footnote 3 for further details.
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Table 3 B 1733
Even Lower-Priority Programs Are Receiving Large Spending Increases
1999 2004
Peanut Subsidies $0 $277 N/AWool & Mohair Subsidies 0 14 N/APresidio Trust -6 43 N/ASmall Business Administration 63 3978 6,181%Office of Lead Hazard Control 2 127 5,615%Enterprise Zones/Enterprise Communities 3 70 2,000%National Technical Information Service 2 20 800%Denali Commission 1 9 710%Dairy Subsidies 223 1443 546%Power Marketing Administration 24 155 534%Federal Motor Carrier Safety Administration 97 502 419%Amtrak 270 1334 394%Maritime Administration 138 633 359%Legislative Branch Boards & Commissions 11 51 359%Architect of the Capitol 188 534 184%Supreme Court of the United States 37 86 135%Commerce Department Management 66 148 126%Labor Department Management 242 536 121%Rural Business—Cooperative Service 50 107 114%
*All amounts adjusted for inflation and set in millions of 2004 dollars.Source: Heritage Foundation calculations based on data from the Office of Management and Budget.
Total Outlays*
IncreaseProgram
and solar and renewableenergy ($1,640 million, dis-cretionary);
• Sell many of the federal gov-ernment’s 1,200 civilian air-craft and 380,000 non-tactical, non-postal vehicles;
• Shift the Energy InformationAgency’s duties to the privatesector ($78 million, discre-tionary);
• Privatize the Architect of theCapitol ($534 million, discre-tionary); and
• Privatize–commercialize airtraffic control operations andfully fund with user fees.
Government-owned enter-prises are not the only candidatesfor privatization. In 2003, taxpay-ers were on the hook for the federalgovernment’s $249 billion in out-standing direct loans and $1,184billion in outstanding guaranteedloans. Government loans typicallyundercut the financial services industry, which hassufficient resources to provide loans to businesses and individuals.
Even worse, government often serves as a lenderof last resort to organizations that private banks donot consider qualified for loans, and the low-costnature of government loans encourages recipients totake unnecessary risks with their federal dollars.Consequently, a high percentage of federal loans arein default, and taxpayers were saddled with $17 bil-lion in direct loan write-offs and guaranteed loanterminations in 2003.6
Therefore, Congress should:
• Begin selling government direct loan programsand create new agency loan guarantees such asthose of the Rural Utilities Service, Small Busi-ness Administration, Export–Import Bank, andRural Housing Service.
GUIDELINE #4: Terminate failed, outdated, and irrelevant programs.
President Ronald Reagan once pointed out that “agovernment bureau is the closest thing to eternal lifewe’ll ever see on earth.” A large portion of the cur-rent federal bureaucracy was created during the1900s, 1930s, and 1960s in attempts to solve theunique problems of those eras.
Instead of replacing the outdated programs of thepast, however, each period of government activismhas built new programs on top of them. Ford MotorCompany would not waste money today by buildingoutdated Model T’s alongside their current Mustangsand Explorers. However, in 2004, the federal gov-ernment still refuses to close down old agenciessuch as the Rural Utilities Service (designed to bringphones to rural America) and the U.S. GeologicalSurvey (created to explore and detail the nation’sgeography).
6. Office of Management and Budget, Budget of the United States Government, Fiscal Year 2005: Analytical Perspectives, pp. 105–106.
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No. 1733 March 10, 2004
Government must be made light and flexible,adaptable to the new challenges the country willface in the 21st century. Weeding out the failed andoutdated bureaucracies of the past will freeresources to modernize the government.
Status Quo Bias. Lawmakers often acknowledgethat certain programs show no positive effects.Regrettably, they also refuse to terminate even themost irrelevant programs. The most obvious reasonfor this timidity is an aversion to fighting the specialinterests that refuse to let their pet programs endwithout a bloody fight.
A less obvious reason is that eliminating govern-ment programs seems reckless and bold to legisla-tors who have never known a federal governmentwithout them. Although thousands of programshave come and gone in the nation’s 228-year his-tory, virtually all current programs were createdbefore most lawmakers came to Washington. Forlegislators who are charged with budgeting andimplementing the same familiar programs year afteryear, a sense of permanency sets in, and termina-tion seems unfathomable.7 No one even rememberswhen a non-government entity addressed the prob-lems.
The Department of Energy, for example, hasexisted for just one-tenth of the country’s history,yet closing it down seems ridiculous to those whocannot remember the federal government before1977 and for whom appropriating and overseeingthe department has been an annual ritual for years.Lawmakers need a long-term perspective to assurethem the sky does not fall when a program is termi-nated. For example, the Bureau of Mines and the
U.S. Travel and Tourism Administration, bothclosed in 1996, are barely remembered today.8
Instead of just assuming that whoever created theprograms decades ago must have been filling someimportant need that probably exists today, lawmak-ers should focus on the future by asking themselvesthe following question: If this program did notexist, would I vote to create it? Because the answerfor scores of programs would likely be “no,” Con-gress should:
• Close down failed or outdated agencies, pro-grams, and facilities, including:
1. The U.S. Geological Survey9 (2004 spend-ing: $841 million, discretionary);10
2. The Maritime Administration ($633 mil-lion, discretionary);
3. The International Trade Commission ($61 million, discretionary);
4. The Economic Development Administration ($417 million, discretionary);
5. The Low-Income Home Energy Assistance Program ($1,892 million, discretionary);
6. The Technology Opportunities Program ($12 million, discretionary);
7. Obsolete military bases;
8. The Appalachian Regional Commission ($94 million, discretionary);
9. Obsolete Veterans Affairs facilities;
10. The Rural Utilities Service (–$1,493 mil-lion,11 mandatory); and
7. Daniel Kahneman, a winner of the 2002 Nobel Prize for Economics, refers to the tendency to value what we possess much more than what we do not possess as the “endowment effect.” For example, people may be indifferent to what mug they pur-chase but, once owning it, will not be willing to sell that mug for any less than several times the price paid for it. The endow-ment effect explains why people will not part with personal items that they know they will never use. It also helps explain why people who are indifferent to creating a government program will nonetheless fight to preserve it later. The stress of giv-ing up something (or terminating a program) is much greater than the joy of acquiring it (or creating a program). See Daniel Kahneman, Jack Knetsch, and Richard Thaler, “The Endowment Effect, Loss Aversion, and Status Quo Bias: Anomalies,” Journal of Economic Perspectives, Vol. 5, No. 1 (1991), pp. 193–206.
8. For other terminated programs long since forgotten, see Ronald D. Utt, “A Progress Report on Closing Unneeded and Obso-lete Independent Federal Agencies,” Heritage Foundation Backgrounder No. 1072, March 13, 1996, at www.heritage.org/Research/GovernmentReform/BG1072.cfm.
9. The U.S. Geological Survey research functions could be transferred to the National Science Foundation.
10. Unless otherwise noted, all amounts listed after each program refer to the estimated 2004 outlays. This is not necessarily the amount that would be immediately saved from enacting the recommendation. See footnote 3 for further details.
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No. 1733 March 10, 2004
11. Repeal Public Law 480’s non-emergency international food programs ($127 million, discretionary).
• End low-priority programs that should neverhave been created in the first place, includ-ing:
1. The Denali Commission (2004 spending: $56 million, discretionary);12
2. The Conservation Reserve Program ($1,879 million, mandatory);13
3. The Commission of Fine Arts ($8 million, discretionary);
4. The Historic Whaling and Trading Partners Exchange Program ($9 million, discretion-ary);
5. The Office of Navajo and Hopi Relocation ($14 million, discretionary);
6. AmeriCorps ($324 million, discretionary);
7. The National Endowment for the Humani-ties ($131 million, discretionary);
8. Farm subsidies for wool, mohair, lentils, and chickpeas ($28 million, mandatory);
9. The Marine Mammal Commission ($3 mil-lion, discretionary);
10. The East−West Center ($20 million, discre-tionary);
11. The Legal Services Corporation ($341 mil-lion, discretionary);
12. The protectionist programs of the Interna-tional Trade Administration ($364 million, discretionary);
13. The Bureau of International Labor Affairs ($105 million, discretionary);
14. The National Commission on Libraries and Information Science ($1 million, discretion-ary);
15. The U.S. Institute of Peace ($17 million, dis-cretionary);
16. The Agriculture Department’s wood utiliza-tion research ($6 million, discretionary);
17. The National Endowment for the Arts ($112 million, discretionary); and
18. Most of the 945 federal advisory committees and commissions scattered across 52 agen-cies.14
• Streamline the federal government by:
1. Cutting the non-security workforce by 10 percent;
2. Reducing the number of consultants employed by the federal government by 150,000;
3. Suspending acquisition of new federal office space;
4. Trimming the federal vehicle budget by 5 percent; and
5. Freezing the federal travel budget at $8 bil-lion15 (Total annual savings: $11 billion).
• Implement some additional housekeepingitems, including:
1. Taking back grants to state and local govern-ments that have not been spent within the past three years;
11. Programs that collect revenues (such as loan repayments, fees, or money from product sales) can occasionally make a profit, or have “negative spending levels.” These negative spending levels are often rare occurrences and do not mask that program’s long-term cost.
12. Unless otherwise noted, all amounts listed after each program refer to the estimated 2004 outlays. This is not necessarily the amount that would be immediately saved from enacting the recommendation. See footnote 3 for further details.
13. At a minimum, Congress should end new enrollments in the program and not renew expiring contracts.
14. For the frequently updated numbers of federal advisory committees and commissions, see General Services Administration, Federal Advisory Committee Act database, at fido.gov/facadatabase/rptgovtstats.asp.
15. See Paul Weinstein Jr., “A Return to Fiscal Responsibility: A Progressive Plan to Slash the Deficit,” Progressive Policy Institute, February 4, 2004, pp. 8–9, at www.ppionline.org/documents/deficit_plan_0104.pdf.
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No. 1733 March 10, 2004
Time to Modernize?A Sample of the Oldest Federal Agencies
· Army Corps of Engineers: 1802· U.S. Department of the Interior : 1849· Government Printing Office: 1860· U.S. Department of Agriculture: 1862· U.S. Geological Survey: 1879· Cooperative State Research Service: 1888· Bureau of Reclamation: 1902· U.S. Department of Commerce: 1903
· Naval Petroleum Reserves: 1912· U.S. Department of Labor: 1913· Agricultural Extension Service: 1914· U.S. Coast Guard: 1915· National Park Service: 1916· Davis-Bacon Act: 1931· Tennessee Valley Authority: 1933· Export-Import Bank: 1934· Natural Resource Conservation Service: 1935 (as Soil Conservation Service)· Rural Utilities Service: 1935 (as Rural Electrification Administration)· Social Security: 1935· Power Marketing Administrations: 1937
2. Rescinding any remaining appropri-ated funds to promote the new $20 bill (2004 spending: up to $53 mil-lion, discretionary); and
3. Consolidating the dozens of small, irrelevant education programs that divert money from more effective education programs ($200 million, discretionary).
GUIDELINE #5: Improve financial management and reform wasteful programs.
Congress must provide stronger financialmanagement oversight for federal programs,which are losing billions of dollars every yearfrom mismanagement. The following exam-ples of inexcusable waste make a convincingcase for reform:
• The federal government cannot accountfor $24.5 billion spent in 2003.16
• The U.S. General Accounting Officerefuses to certify the federal government’s ownaccounting books because the bookkeeping isso poor.
• Of the 26 departments and major agencies, 18received the lowest possible rating for theirfinancial management, meaning that auditorscannot even express an opinion on theirfinancial statements.17
• The Medicare program pays as much as eighttimes the cost that other federal agencies payfor the same drugs and medical supplies.18
• The federal government made $20 billion inoverpayments in 2001.
• The Department of Housing and Urban Devel-opment’s $3.3 billion in overpayments in 2001accounted for over 10 percent of the depart-ment’s total budget.19
• Recently, the Department of Agriculture wasunable to account for $5 billion in receipts andexpenditures;
• The Internal Revenue Service does not evenknow how much it collects in payroll taxes.20
• Congressional investigators were able to receive$55,000 in federal student loan funding for afictional college they created to test the Depart-ment of Education.21
16. The federal government calls this spending “unreconciled transactions.” See U.S. Department of the Treasury, 2003 Financial Report of the United States Government, p. 126, at www.fms.treas.gov/fr.
17. Office of Management and Budget, Budget of the United States Government, Fiscal Year 2005, p. 51.
18. Janet Rehnquist, Inspector General, U.S. Department Health and Human Services, testimony before the Subcommittee on Labor, Health and Human Services, and Education, Committee on Appropriations, U.S. Senate, June 12, 2002, at oig.hhs.gov/testimony/docs/2002/020611fin.pdf.
19. “OMB Says U.S. Overpaid $20 Billion to Health Providers, Others, in 2002,” Bureau of National Affairs Daily Report for Exec-utives, June 3, 2002.
20. Committee on Governmental Affairs, U.S. Senate, Government at the Brink: Urgent Federal Government Management Problems Facing the Bush Administration, June 2001, p. 26.
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No. 1733 March 10, 2004
• The Army Corps of Engineers has been accusedof illegally manipulating data to justify expen-sive but unnecessary public works projects.22
• A recent audit revealed that employees of theDepartment of Agriculture (USDA) diverted asmuch as 3 percent of the USDA budget to per-sonal purchases through their government-issued credit cards.23
• Over one recent 18-month period, Air Force andNavy personnel used government-funded creditcards to charge at least $102,400 for admissionto entertainment events, $48,250 for gambling,$69,300 for cruises, and $73,950 for exoticdance clubs and prostitutes.24
The government’s own auditors, as well as outsidewatchdog groups, have recommended specificreforms to:
• Reduce food stamp overpayments (annual netlosses: $600 million, mandatory);25
• Verify parent incomes for school lunches (up to$120 million, mandatory);
• Improve eligibility verification and tracking ofstudent loan recipients (at least $1 billion, man-datory);
• Prevent states from using accounting tricks tosecure extra Medicaid funds (several billion dol-lars, mandatory);
• Combat fuel tax fraud ($1 billion, discretion-ary);
• Stop veterans program overpayments ($800 mil-lion, mandatory/ discretionary);
• Collect $3 billion in outstanding debt owed tothe Department of Veterans Affairs;
• Stop Medicare overpayments ($12.3 billion,mandatory);
• Reform Medicare so that it no longer overpaysfor prescription drugs and medical supplies($2,900 million, mandatory);
• Recover the $7 billion owed by Medicare con-tractors; and
• Reform the Earned Income Tax Credit (EITC) tostop overpayments ($9 billion, mandatory).
GUIDELINE #6: Terminate corporate welfare and other mistargeted programs.
There is no justification for taxing waitresses andwelders to subsidize Fortune 500 companies. Mistar-geted programs, such as approximately $60 billionin annual corporate welfare spending, come in manyformsdirect payments, low-cost loans or insur-ance, and subsidized servicesbut they all provideservices to which special interests are not entitledand that they do not need.
These programs harm the economy. Operatingsubsidies and loans to private businesses overtaxproductive sectors of the economy and redistributethat money to less productive sectors, based on thefallacy that it will somehow create jobs. Programssubsidizing start-up companies represent a mis-guided attempt by government to pick the market’swinners and losers.
In addition, research subsidies for profit-seekingbusinesses, which already have an incentive to fundtheir own profitable research, merely displace private
21. Associated Press, “GAO Sting Targets Lax Student Loan Oversight,” January 21, 2003.
22. Michael Grunwald, “How Corps Turned Doubt into a Lock,” The Washington Post, September 13, 2002.
23. The 300 employees randomly sampled had charged $5.8 million in personal purchases over six months in late 2001 and early 2002. Applying that sample to all 55,000 USDA credit card holders over a full year calculates to $2.1 billion, or 3 percent of the USDA’s 2002 budget. U.S. Department of Justice, Office of Inspector General, Adequacy of Internal Controls over the Individu-ally Billed Travel Card Program, Report No. 50601–05–HQ, June 19, 2003, at www.usda.gov/oig/webdocs/50601-05-HQ.pdf.
24. U.S. General Accounting Office, Travel Cards: Air Force Management Focus Has Reduced Delinquencies, But Improvements in Con-trols Are Needed, GAO–03–298, December 20, 2002, p. 4, and Travel Cards: Control Weaknesses Leave Navy Vulnerable to Fraud and Abuse, testimony before Committee on Government Reform, U.S. House of Representatives, GAO–03–148T, October 8, 2002, p. 8.
25. Amounts in this section refer to the annual net losses from the waste. See Brian M. Riedl, “How Congress Can Achieve Savings of 1 Percent by Targeting Waste, Fraud, and Abuse,” Heritage Foundation Backgrounder No. 1681, August 28, 2003, at www.heritage.org/Research/Budget/BG1681.cfm.
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No. 1733 March 10, 2004
research funding with taxpayer funds. Emergencygrant and loan programs encourage businesses totake irrational risks with the assurance that taxpay-ers will cover any losses.
Congress therefore should:
• Eliminate direct corporate welfare paymentsby:
1. Closing down the Minority Business Devel-opment Agency (2004 spending: $22 mil-lion, discretionary);26
2. Disqualifying high-income farmers and agribusinesses from farm subsidies ($8,000 million, mandatory);27
3. Eliminating the Small Business Administra-tion ($3,978 million, discretionary);
4. Terminating the Overseas Private Invest-ment Corporation (–$157 million, discre-tionary);
5. Shutting down the Trade and Development Agency ($62 million, discretionary);
6. Eliminating the Market Access Program ($119 million, mandatory);
7. Closing down the Export−Import Bank (–$1,582 million, mandatory);
8. Repealing the Davis−Bacon and Service Contract Acts; and
9. Terminating the Essential Air Service Pro-gram ($57 million, discretionary).
• Stop funding research that directly benefitsprivate industry, by ending or shuttingdown:
1. The Advanced Technology Program (2004 spending: $195 million, discretionary);
2. The Manufacturing Extension Partnerships ($40 million, discretionary);
3. The Cooperative State Research, Education and Extension Service ($1,082 million, dis-cretionary);
4. The Agricultural Research Service ($1,179 million, discretionary); and
5. The Department of Energy research grants that displace private funding.
• Enact user fees that recover all the costs ofprograms with identifiable users, such as:
1. Requiring agribusinesses and farmers to assume the full cost of their crop insurance coverage (2004 spending: $3,965 million, mandatory); and
2. Imposing user fees on commodity futures and options contract transactions to help finance the Commodity Futures Trading Commission ($91 million, discretionary).
• Reform other programs targeted to thewrong recipients by:
1. Restricting federal housing assistance to those with the greatest need and requiring able-bodied, non-elderly recipients to engage in work-related activities;
2. No longer providing substantially more fed-eral aid to Howard University than is pro-vided to other private universities;
3. Limiting Congress’s franking privilege to non-election years to prevent taxpayer funding of campaign mailings; and
4. Enforcing current laws limiting School Lunch program eligibility to low-income families.
GUIDELINE #7: Consolidate duplicative and contradictory programs.
Government’s layering of new programs on topof old ones inherently creates duplication. Havingseveral agencies perform similar duties is wastefuland confuses program beneficiaries who must navi-gate each program’s distinct rules and requirements.
Some overlap is inevitable because some agenciesare defined by whom they serve (e.g., veterans, Native
26. Unless otherwise noted, all amounts listed after each program refer to the estimated 2004 outlays. This is not necessarily the amount that would be immediately saved from enacting the recommendation. See footnote 3 for further details.
27. Data from the Environmental Working Group (www.ewg.org) show that two-thirds of farm subsidies are granted to the largest 10 percent of agribusinesses and farmers. The $8 billion reflects two-thirds of the estimated total 2004 farm subsidies.
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No. 1733 March 10, 2004
2004 Federal Spending: Just How Much Is $2.3 Trillion?
More than the annual gross domestic product of South America;More than the federal government spent in its first 179 years combined, from 1789 to 1967; Washington spends more per second ($73,535) than most households earn over an entire year ;$7,974 per American;$21,673 per household;$762,076,898 per county;$45,470,588,235 per state; andIn $1 bills, it would stack halfway to the moon, weigh 10 times as much as the Sears Tower, and blanket the entire state of New Jersey.
Americans, urbanites,and rural families),while others aredefined by what theyprovide (e.g., housing,education, health care,and economic devel-opment). When theseagencies’ constituen-cies overlap, as in vet-erans housing or ruraleconomic develop-ment, each relevantagency will often have its own program. With 342 sep-arate economic development programs, the federalgovernment needs to make consolidation a priority.
Consolidating duplicative programs will savemoney and improve government service. Mergingrelated block grants will give states more flexibilityto target their funds. The new Department of Home-land Security provides one example of a successfulconsolidation of separate agencies and programs. Arecently announced consolidation of the 22 differentfederal payroll systems into just two will save $1.2billion over the next decade. At the state level, gov-ernors such as Virginia’s Mark Warner (D) are pro-posing consolidations that will save hundreds ofmillions of dollars.
Except for those that should be eliminated alto-gether, Congress should consolidate the followingsets28 of programs:
• 342 economic development programs;
• 130 programs serving the disabled;
• 130 programs serving at-risk youth;
• 90 early childhood development programs;
• 75 programs funding international education,cultural, and training exchange activities;
• 72 federal programs dedicated to assuring safewater;
• 50 homeless assistance programs;
• 45 federal agencies conducting federal criminalinvestigations;
• 40 separate employment and training programs;
• 28 rural development programs;
• 27 teen pregnancy programs;
• 26 small, extraneous K–12 school grant pro-grams;
• 23 agencies providing aid to the former Sovietrepublics;
• 19 programs fighting substance abuse;
• 17 rural water and waste-water programs ineight agencies;
• 17 trade agencies monitoring 400 internationaltrade agreements;
• 12 food safety agencies;
• 11 principal statistics agencies; and
• 4 overlapping land management agencies.
GUIDELINE #8: Convert several remaining programs into vouchers.
Government programs should not be bloatedbureaucracies that shepherd recipients into one-size-fits-all programs. Voucher programs, whichallow individuals to purchase goods and services onthe open market rather than receiving them from thegovernment, have two distinct advantages:
• Choice. Instead of forcing program recipients totake what a bureaucracy provides, vouchersallow them to shop around and find the goodsand services that fit their needs.
28. Examples are from Committee on Governmental Affairs, U.S. Senate, Government at the Brink, and U.S. General Accounting Office, Managing for Results: Using the Results Act to Address Mission Fragmentation and Program Overlap, GAO/AIMD–97–146, August 1997.
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No. 1733 March 10, 2004
• Efficiency. Providing health insurance or hous-ing vouchers is much less costly to governmentthan the construction and maintenance of gov-ernment-owned hospitals or housing. Competi-tion among private firms for vouchers wouldbring about lower prices than governmentmonopolies.
Some policymakers believe that low-incomeindividuals cannot be trusted to make intelligenteconomic decisions with their vouchers, conde-scendingly implying that government employeesknow best how to run the lives of poor families.Those worrying that private markets could notaccommodate the influx of voucher-wielding fami-lies fail to recognize that vouchers create markets bystrengthening demand and thereby inducing newsupply.
Food stamps provide the model for a successfulvoucher program.29 Instead of building a bureau-cracy to grow and distribute government food tolow-income families, the program simply providesfamilies with vouchers to purchase food them-selves. Housing vouchers that subsidize private rentcosts have proven better for low-income familiesthan dilapidated, dangerous public housing. Mostchild-care programs subsidize the private facilitiesthat parents choose instead of forcing them intogovernment-run facilities. Federal student loan pro-grams exist as a type of education vouchers.
Vouchers can provide choice without bureau-cracy in many other areas. Medicare and Medicaidcould be made more like the Federal EmployeesHealth Benefits Program (FEHBP), in which federalemployees choose between competing privatehealth plans with the federal government subsidiz-ing the premium. More public housing programscan be replaced with rent vouchers.
GUIDELINE #9: Terminate programs rather than trimming them or phasing them out.
Budget cutters often commit the tactical error ofsettling for small reductions or lengthy phaseouts ofobsolete programs instead of immediately terminat-
ing them. They mistakenly believe that securingsmall program reductions now will allow them tocome back and cut the program more next time.
But leaving obsolete programs in place simplycreates an opportunity for future Congresses torestore funding. Furthermore, retaining the pro-grams leaves the bureaucracy in place and allows itto enlist interest groups in a counteroffensiveagainst spending reductions. The old line that“those attacking the throne had better kill the kingon the first shot” applies to government programsas well.
In the 1980s, President Reagan successfully termi-nated only 12 of the 94 programs he proposed beeliminated. Congress would often block the termi-nations by negotiating slight reductions and lengthyphaseouts, waiting a few years for the President’sfocus to shift elsewhere and then restoring the pro-grams to their original funding.30 Similarly, Membersof the 104th Congress who proposed ending federalsubsidies to programs such as AmeriCorps and theCorporation for Public Broadcasting were persuadedto settle for slight spending reductions and a promiseto cut more later, and the budgets of those programshave since rebounded to all-time highs.
One must never assume that spending reduc-tions today will be followed up with additionalreductions later. Retaining a program means retain-ing a bureaucracy dedicated to self-preservation,interest groups dedicated to aiding the bureaucracy,and a budget line item to which Congress can easilyattach a larger number next year.
GUIDELINE #10: Utilize the “ideas industry” for specific proposals.
Those seeking specific proposals to reducewasteful spending have several options available:
• The Congressional Budget Office (CBO) period-ically releases a Budget Options book containingmore than 200 specific reforms that wouldreduce more than $100 billion in wastefulspending, complete with justifications and sav-ings estimates. (See Appendix 3.)
29. Although food stamp overpayments are a problem, the program still provides more choice and efficiency than it would if it were providing government-grown food.
30. See Scott Hodge and John Barry, “The 10 Percent ‘Revolution’: House Spending Bills Fall Short of Overhauling Government,” Heritage Foundation Backgrounder No. 1053, September 14, 1995.
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No. 1733 March 10, 2004
• The General Accounting Office (GAO) conductshundreds of studies each year on wasteful andunderperforming federal programs. The GAOalso often releases a Budgetary Implications ofSelected GAO Work for the current fiscal year,which is a book similar to CBO’s Budget Options,detailing hundreds of specific, implementableways to reduce waste.
• The Government Performance and Results Act(GPRA) requires agencies to lay out specificmulti-year goals to improve performance andreduce waste and report regularly on theirprogress toward these goals. Together withInspector General (IG) reports, GPRA reportsshow which programs are failing in their mis-sions.
• Think tanks such as The Heritage Foundation,the Cato Institute, and Citizens Against Govern-ment Waste release hundreds of studies eachyear showing how to save taxpayer dollars.
The President should try to eliminate wastefulprograms in his budget. Legislators should alsoexamine every line item in the President’s budgetappendix and terminate programs that lack suffi-cient explanations or justifications.
ConclusionDifficult times present opportunities for leaders to
chart a new course. During World War II, PresidentFranklin Roosevelt reduced non-defense spendingby 36 percent to save resources. Policymakersfunded the Korean War by immediately reducingnon-defense spending by 25 percent. Those spend-ing cuts required difficult choices, and lawmakersrose to the challenge.
In 2004, bold steps are again needed to rein inspending. The choices will be as difficult as those ofthe past, but that is what budgets are about—settingpriorities. Congress and the President should seizethis opportunity to refocus the federal governmenton the programs that matter most. Otherwise, theAmerican people will face higher taxes, fewer jobs,less economic growth, and less effective govern-ment.
—Brian M. Riedl is Grover M. Hermann Fellow inFederal Budgetary Affairs in the Thomas A. Roe Institutefor Economic Policy Studies at The Heritage Foundation.Heritage Foundation research assistant Keith Miller con-tributed to this paper.
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No. 1733 March 10, 2004
Appendix 1a B 1733
Largest Spending Reductions Proposed in President Bush's FY 2005 Budget
Department/Agency Program
Budget Authority ($millions)
2001 2004 2005
Proposal 2005
Growth
AgricultureAgricultureAgricultureAgricultureAgricultureAgricultureAgricultureAgricultureAgricultureAgricultureAgricultureAgricultureAgricultureAgricultureCommerceCommerceCommerceCommerceEducationEducationEducationEducationEducationEducationEducationEducationEducationEducationEducationEducationEducationEducationEducationEducationEducationEducationEducationEducationEducationEducationEducationEducationEducationEducationEducationEducationEducationEducationEducationEducationEducationEducationEducationEducationEducationEducationEducationEducationHHSHHSHHSHHSHHSHHSHHSHHSHHS
Agricultural Research Service, Salaries and ExpensesCCC Bioenergy ProgramCSREES: Research and Education GrantsForest Service Forest Land Enhancement ProgramNatural Resource Conservation Service, Conservation OperationsNRCS. Conservation Security ProgramNRCS: Environmental Quality Incentives ProgramRural Business Service (RBS) Value Added Marketing GrantsRBS Rural Business Investment ProgramRural Housing Service Rural Firefighter Training GrantsRural Utilities Service (RUS) Electric Loan ProgramRUS Broadband Loan Program (Mandatory)RUS LOCAL TV Loan ProgramRUS Water and Wastewater (RWW) GrantsAdvanced Technology Program (ATP)Technology Opportunities Program (TOP)Repeal of Continued Dumping and Subsidy Offset Act Public Telecomm Facilities, Planning, & Construction Program Assistive Technology (AT)Vocational Education State GrantsAlcohol Abuse ReductionArts in EducationB.J. Stupak Olympic ScholarshipsClose Up FellowshipsCommunity Technology CentersComprehensive School ReformDemonstration Projects to Ensure Quality Higher Education for Students with DisabilitiesDropout Prevention ProgramsEisenhower National Clearinghouse for Math and Science EducationEisenhower Regional Math and Science Education ConsortiaElementary and Secondary School CounselingEven StartExcellence in Economic EducationExchanges with Historic Whaling and Trading PartnersFederal Perkins Loans: Capital ContributionsForeign Language AssistanceJavits Gifted and Talented EducationLeveraging Educational Assistance PartnershipsLiteracy Programs for PrisonersMigrant and Seasonal FarmworkersNational Writing ProjectOccupational and Employment InformationParental Information and Resource CentersProjects With IndustryReady to TeachRecreational ProgramsRegional Educational LaboratoriesRegional Technology in Education ConsortiaSchool LeadershipSmaller Learning CommunitiesStar SchoolsState Grants for Incarcerated Youth OffendersSupported Employment State GrantsTech-Prep DemonstrationTech-Prep Education State GrantsUnderground Railroad ProgramVocational Education National ProgramsWomen’s Educational EquityACF: Community Food and NutritionACF: Community Services Block GrantACF: Early Learning Opportunities FundACF: National Youth SportsACF: Rural Community FacilitiesCDC and HRSA: State/Local/Hospital Bioterrorism GrantsCDC: Global FundCDC: Buildings and FacilitiesCDC: Youth Media Campaign
$89941
5430
7130
200000
3300
59014545
2474341
1,1000
2812
65210
605
1530
25000
100148
5552
109
382283
65100
1256017385
1062
1836
60020165
670
175125
$1,08215062910
84841
975-40-95-20
0-20
056417114
2932026
1,195303511
10234
75
-51534
24719
9917116652
189
4222143
671012
1742020385
1072
1237
64234187
1,44914926036
$988100516-40710209
1,000-80-65-30
5-40-44346
0003
151,012
000000000000000000000000000000000000000
495000
1,305100825
-9%-33%-18%
-500%-16%410%
3%-100%
32%-50%
-100%-100%-100%-39%
-100%-100%-100%-85%-42%-15%
-100%-100%-100%-100%-100%-100%-100%-100%
n/a-100%-100%-100%-100%-100%-100%-100%-100%-100%-100%-100%-100%-100%-100%-100%-100%-100%-100%-100%-100%-100%-100%-100%-100%-100%-100%-100%-100%-100%-100%-23%
-100%-100%-100%-10%-33%-68%-86%
Appendix 1
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No. 1733 March 10, 2004
Appendix 1b B 1733
HHSHHSHHSHHSHomeland SecurityHomeland SecurityHUDHUDHUDHUDHUDHUDHUDHUDHUDInteriorInteriorInteriorJusticeJusticeJusticeJusticeJusticeJusticeJusticeJusticeJusticeJusticeJusticeJusticeLaborLaborLaborLaborLaborLaborTransportationTransportationTransportationTreasuryVeterans AffairsCorps of EngineersCorps of EngineersEPAEPAEPAIntl. AffairsIntl. AffairsIntl. AffairsIntl. AffairsNASANASANASANASANASANSFSBAU.S. Postal ServiceInd. AgenciesInd. Agencies
HRSA: Healthy Community Access ProgramHRSA: Health Professions Training GrantsHRSA: Rural HeathMedicaid: Program IntegrityFirst RespondersMetropolitan Medical Response System (MMRS)Brownfields RedevelopmentCommunity Development Loan Guarantees (Section 108)Community Development Stock Grant EarmarksEmpowerment ZonesHOPE VI Revitalization of Severely Distressed Public HousingLead Hazard ReductionPublic Housing Capital FundPublic Housing Drug Elimination ProgramRural Housing and Economic DevelopmentBureau of Indian Affairs (BIA) School ConstructionNational Park Service (NPS) Statutory AidNPS Heritage Area grantsCOPS Hiring GrantsCOPS Interoperable Communications Technology GrantsCOPS Law Enforcement Technology GrantsEdward Byrne Memorial Grant ProgramFederal Prison SystemJuvenile Accountability Incentive Block Grants GrantsJuvenile Justice Title II Part E Demonstration ProgramsJuvenile Justice Title V Delinquency Prevention ProgramLocal Law Enforcement Block Grant (LLEBG)Methamphetamine Enforcement and Clean-upPrison Rape and PreventionState Criminal Alien Assistance Program (SCAPP)H-18 Training Grants (mandatory, fee-financed)Dislocated Worker AssistancePilot and Demonstration programsEmployment Service State GrantsBureau of International Labor AffairsMigrant and Seasonal Farmworker TrainingFAA Capital ModernizationAmtrakFederal Railroad Administration: Next Generation Highspeed RailRS Business Systems ModernizationMedical and Prosthetic ResearchConstruction projects funded in various programs and accountsStorm Damage Reduction ProgramClean Water State Revolving FundSTAR GrantsUnrequested Project Funding.Assistance for Eastern Europe and the Baltic States (SEED)Assistance for the Ind. States of the Former Soviet Union (FSA)Child Survival and Disease ProgramsSustainable Development AssistanceAeronauticsEarth ScienceEducationPhysical Sciences ResearchSpace Launch InitiativeMath and Science PartnershipsMicroloan ProgramForgone Revenue for Reduced Rate MailDenali CommissionElection Assistance Commission
Total
125353148n/an/a172530
401185574100
2,99330925
2921414
4080
140568
4,274249
095
522480
5640
1,59097
79714877
2,65152025
166706n/a
1211,347
93494542559851
1,273975
1,762133n/an/an/a222941n/a
34,481
104409147n/a
4,36550257
33415
149174
2,6960
252951314
11984
157704
4,759597978
2235337
2970
1,44858
78711077
2,8931,218
37388818
0106
1,342100511442584
1,8241,3561,0341,613
226357967139172959
1,49245,350
1012656
-1,5423,361
000000
1392,674
00
229030000
4,70907
440
2080
-1001,383
30696300
2,50090010
285770
-10052
850640
410550
1,4201,308
9191,485
16930026180006
6530,779
-90%-69%-62%
n/a-23%
-100%-100%-100%-100%-100%-100%-20%-1%n/a
-100%-22%
-100%-79%
-100%-100%-100%-100%
-1%-100%-91%-44%
-100%-62%-78%
-100%n/a
-4%-48%-12%-73%
-100%-14%-26%-73%-27%-6%n/a
-51%-37%-36%
-100%-7%-6%
-22%-4%
-11%-8%
-25%-16%-73%-42%
-100%-100%-90%-96%-32%
Department/Agency Program
Budget Authority ($millions)
2001 2004 2005
Proposal 2005
Growth
Appendix 1 (continued)
Source: Office of Management and Budget.
page 19
No. 1733 March 10, 2004
Appendix 2 B 1733
Candidates for CutsTroubled Programs in the President's 2005 Program Assessment Rating Tool (PART) Reviews
Department/Agency D/M 2001 2004
2005 Proposal
2005 Growth PART Critique*Program
Budget Authority ($millions)
AgricultureAgricultureAgricultureCommerceCommerceCommerceCommerceCommerceDefenseDefenseEducationEducationEducationEducationEducationEducationEducationEducationEducationEducationEducationEducationEducationEducationEducationEnergyEnergyEnergyEnergyEnergyHHSHHSHHSHHSHHSHHSHHSHHSHHSHHSHHSHomeland SecurityHUDHUDHUDHUDHUDInteriorInteriorInteriorJusticeJusticeJusticeJusticeLaborLaborLaborLaborLaborLaborTreasuryTreasuryTreasuryVeterans AffairsEPAEPAEPASBAUSAID
MDMDDDDMDMDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDDMMMDMDDMDDDMDDMDMDDDMD
Direct Crop PaymentsNational Forest Improvement and MaintenancePesticide Data/Microbiological Data ProgramsAdvanced Technology Program Commerce Small Business Innovation Research (SBIR) ProgramManufacturing Extension PartnershipNational Marine Fisheries ServiceUS and Foreign Commercial Service (USFCS)Chemical DemilitarizationFacilities Sustainment, Restoration, Modernization, and Demolition21st Century Community Learning CentersComprehensive School Reform Even Start Federal Family Education LoansFederal Perkins Loans Federal Perkins Loans (Capital Payments) GEAR UPIDEA Preschool GrantsSafe and Drug Free Schools State GrantsStudent Aid AdministrationTRIO Upward BoundTroops-to-TeachersVocational Education State Grants Vocational Rehabilitation State GrantsWilliam D. Ford Direct Student LoansBuilding TechnologiesClean Coal Research InitiativeNatural Gas TechnologiesOil TechnologySafeguards and SecurityChildren's Hospitals Graduate Medical Education Payment ProgramChronic Disease - Breast and Cervical CancerChronic Disease - DiabetesCommunity Mental Health Services Block GrantFoster CareHealth Professions Nursing Education Loan Repayment and Scholarship ProgramSubstance Abuse Prevention and Treatment Block GrantSubstance Abuse Treatment Programs of Regional and National SignificanceTranslating Research into PracticeUrban Indian Health ProgramAssistance to Firefighters Grant ProgramCommunity Development Block Grant (Formula)HOPE VI Housing for Persons with DisabilitiesHousing for the ElderlyProject-Based Rental AssistanceEnergy and Minerals ManagementIndian School OperationsTribal CourtsCommunity Oriented Policing Services Drug Enforcement AdministrationJuvenile Accountability Block Grants State Criminal Alien Assistance Program Community Service Employment for Older AmericansDislocated Worker Assistance Migrant and Seasonal Farmworkers Mine Safety and Health AdministrationTrade Adjustment Assistance Youth ActivitiesBank Enterprise AwardEarned Income Tax Credit (EITC) ComplianceInternational Development AssociationDisability CompensationRCRA Corrective ActionBrownfieldsTribal General AssistanceBusiness Information CentersUSAID Climate Change
Totals
$4,15154822
1798
106754206
1,4496,620
993233248
3,4329999
29338746990027929
1,1922,5334,225
673454742
52929019963
4374,451
40120
1,7543171031
7454,340
570249778
4,76610651317
9781,802
189248442
1,15077
27397299418
145844
25,38535
1675714
214
84,545
$5,37555921
1714
39676202
1,6506,424
999234247
2,8809999
29838844191228215
1,1952,5842,381
603784335
55330321067
4354,706
40927
1,779419
832
7464,331
149250774
4,76910852218
7421,677
59297439
1,17377
2691,338
9959
201977
27,71239
1706214
175
85,731
$5,2845052100
39662212
1,4576,643
99900
7,05000
29838844193528115
1,0122,636-492
584472615
66730322067
4364,871
12632
1,832517
532
5004,331
0249773
5,1021085221844
1,79700
4401,106
0276
1,0571,001
5176
1,06832,266
39210620
155
89,345
-2%-10%
0%-100%-100%
0%-2%5%
-12%3%0%
-100%-100%145%
-100%-100%
0%0%0%3%0%0%
-15%2%
-121%-3%18%
-40%-57%21%0%5%0%0%4%
-69%19%3%
23%-38%
0%-33%
0%-100%
0%0%7%0%0%0%
-94%7%
-100%-100%
0%-6%
-100%3%
-21%1%
-44%-12%
9%16%0%
24%0%
-100%-11%
4.2%
Flawed purpose & design Marginally adequate Marginally adequate Flawed purpose & design Flawed purpose & design Flawed purpose & design Marginally adequate Marginally adequate Ineffective Marginally adequate Marginally adequate Marginally adequate Ineffective Marginally adequate Flawed purpose & design Ineffective Marginally adequate Flawed purpose & design Ineffective Marginally adequate Ineffective Marginally adequate Ineffective; flawed purpose & design Marginally adequate Marginally adequate Marginally adequate Marginally adequate Ineffective; flawed purpose & design Ineffective Marginally adequate Marginally adequate; flawed purpose & design Marginally adequate Marginally adequate Marginally adequate Marginally adequate Ineffective Marginally adequate Ineffective Marginally adequate Marginally adequate Flawed purpose & design Flawed purpose & design Ineffective; flawed purpose & design Ineffective; flawed purpose & design Flawed purpose & design Flawed purpose & design Ineffective; flawed purpose & design Marginally adequate Marginally adequate Flawed purpose & design Flawed purpose & design Marginally adequate Ineffective Flawed purpose & design Ineffective; flawed purpose & design Marginally adequate Ineffective; flawed purpose & design Marginally adequate Ineffective Ineffective; flawed purpose & design Flawed purpose & design Ineffective Marginally adequate Flawed purpose & design Marginally adequate Marginally adequate Marginally adequate Flawed purpose & design Marginally adequate
Definitions: Ineffective: PART review demonstrates results with an overall score below 50%. Marginally Adequate: PART review demonstrates results with an overall score between 50% and 60%. Flawed Purpose & Design: "Program Purpose and Design" score below 50%.
Source: Office of Management and Budget.
Appendix 2
**
* **Discretionary/Mandatory Spending
page 20
No. 1733 March 10, 2004
Appendix 3a B 1733
Spending Reduction Options from the Congressional Budget Office's "Budget Options," 2003 Edition
Discretionary Programs
5753
144
75
Savings ($millions)Option Number
150-02
270-01
050-29
150-01
050-27
050-28
050-25
050-26
050-23
050-24
050-21
050-22
050-19
050-20
050-17
050-18
050-14
050-15
050-12
050-13
050-10
050-11
050-08
050-09
050-06
050-07
050-05
050-02
050-03
End the United States' Capital Subscriptions to the European Bank for Reconstruction and Development
Eliminate the Department of Energy's Applied Research for Fossil Fuels
Price Military Housing According to Market Rates
Change Depots' Pricing Structure for Repairs
Eliminate the Export-Import Bank, the Overseas Private Investment Corporation, and the Trade and Development Agency
Create Incentives for Military Families to Save Energy
Consolidate and Encourage Efficiencies in Military Exchanges
Consolidate the Department of Defense's Retail Activities and Provide a Grocery Allowance to Service Members
Eliminate the Department of Defense's Elementary and Secondary Schools
Increase the Use of Warrant Officers to Attract and Retain Personnel
Reduce Recruiting Budgets
Have the Departments of Defense and Veterans Affairs Purchase Drugs Jointly
Introduce a "Cafeteria Plan" for the Health Benefits of Family Members of Active-Duty Military Personnel
Slow the Schedule of the F-35 Joint Strike Fighter Program
Substitute Unmanned Combat Air Vehicles for Manned Aircraft
Accelerate Replacement of the C-5's Engines
Reduce Nuclear Delivery Platforms to Achieve the Moscow Treaty's Limits on Operational Nuclear Warheads
Reduce the Trident Submarine Force to 12 and Buy 48 Fewer D5 Missiles
Target Pay to Meet Military Requirements
Reduce Military Personnel in Overseas Headquarters Positions
Replace Military Personnel in Some Support Positions with Civilian Employees of the Department of Defense
050-04
Cancel Production of the V-22 Aircraft
Reduce Purchases of the Air Force's F/A-22 Fighter
050-01
Cancel the Army's Comanche Helicopter Program
Reduce the Procurement of VA-class Subs and Transfer Six More Subs to Guam
Cancel the DDX Program and Buy New Frigates Instead
Eliminate Research and Development Funding for the Second Future Carrier
Cancel Remaining Purchases of the Javelin Missile
Reverse Organizational Changes that Have Increased the Army's Support Tail Without Increasing its Combat Tooth
Reduce the Number of Army Stryker Brigade Conversions
Delay the Fielding Date of the Future Combat System from 2008
BA/O*
BAOBAOBAOBAOBAOBAOBAOBAOBAOBAOBAOBAOBAOBAOBAOBAOBAOBAOBAOBAOBAOBAOBAOBAOBAOBAOBAOBAOBAOBAOBAO
2004
$17450
231196542157
00
1,100589
-240-130870518106
1,451388
000000
-556-18810050
11060
7517141151142011912142031351284438181443
7353
326231-20-16
00
4231
5867200
505151
2005
$142107478433623380
1,255569
1,1981,040
-40-250
1,2701,040
1110
1,870980
82
1342900
3,376635360270170160
1,6511,606
23723641740618919027524711410476642116
129109410342
-3-6
1,785538873
609261
00
644370
2006
$992
493480880592
1,054781
1,5311,140
750-60
3,0601,100
1211
1,7911,5011,044
2641,759
38800
3,1762,332
820640330270
2,7352,681
3713716496371591614624211441381881644235
1861664974352619
1,4594611351186444373820
659549
2007
$11678
507501754714
2,6141,4742,2741,4261,190
2402,5801,070
1715
1,7221,7233,1901,2752,3281,080
00
1,2112,446
830850220270
3,0913,073
3843838948821241255365181571542071995248
1911845374944943
1,1568231381336845413925
674619
2008
$160
522517220597
1,1611,1701,5841,7524,200
7202,9001,300
711
8011,5513,9742,6732,5521,531
144
-1,0701,106
470630200180
3,2963,286
3973969249228183
6095981731702162125352
1951925795426763
1,0328491421397136054030
690665
2004-2008
$441387
2,2312,1263,0192,4386,0843,9957,6875,9465,860
52010,6805,020
7,6366,1428,2174,2146,7733,028
6,1376,3322,5802,4401,030
94011,52511,3601,5031,5013,0863,040
767763
2,0171,910
632604705653173154774704
2,3502,044
118103
5,4322,186
546495
3,2361,916
117
3,1722,354
2004-2013
$441439
5,0164,9493,3213,1806,6756,493
14,10912,73621,34012,38019,67017,170
998880
9,7168,889
18,72418,35518,42017,0063,5872,4815,7094,8025,5005,0702,8402,440
30,23030,0283,7113,7058,1948,1401,3181,3126,2596,0921,7731,7231,9311,861
460437
1,8281,7455,4715,081
754718
9,4275,5411,3121,2527,0575,307
329277
6,8755,954
Appendix 3
*Budget Authority/Outlays.
page 21
No. 1733 March 10, 2004
Appendix 3b B 1733
BAOBAOBAOBAOBAOBAOBAOBAOBAOBAOBAOBAOBAOBAOBAOBAOBAOBAOBAOBAOBAOBAOBAOBAOBAOBAOBAOBAOBAOBAO
BA
O
920-02
920-04
800-01
800-03
600-02
600-10
550-09
600-01
500-10
500-11
500-08
500-09
500-01
500-02
400-01
400-09
370-03
370-04
370-01
370-02
300-10
300-11
300-06
300-09
300-01
300-02
270-04
270-07
270-02
270-03
Eliminate General Fiscal Assistance to the District of Columbia
Eliminate Federal Antidrug Advertising
Raise the Threshold for Coverage under the Davis-Bacon Act
Eliminate Cargo Preference
Reduce Subsidies for Health Professions Education
Increase Payments by Tenants in Federally Assisted Housing
Reduce Rent Subsidies for Certain One-Person Households
Restructure the Government's Matching Contributions to the Thrift Savings Plan
End New Federal Funding for Perkins Loans
Eliminate Administrative Fees Paid to Schools in the Campus-Based Student Aid and Pell Grant Programs
Eliminate the Leveraging Educational Assistance Partnership Program
Eliminate the Senior Community Service Employment Program
Reduce Federal Subsidies for Amtrak
Increase Fees for Transportation Security
Reduce Funding to School Districts for Impact Aid
Repeal the Safe and Drug-Free Schools and Communities Act
End the Credit Subsidy for the Small Business Administration's Major Business Loan Guarantee programs
Eliminate the International Trade Administration's Trade Promotion Activities or Charge the Beneficiaries
Eliminate the Advanced Technology Program
Eliminate the Manufacturing Extension Partnership and the National Quality Program
Impose Fees on Users of the Inland Waterway System
Terminate Economic Assistance Payments under the South Pacific Fisheries Treaty
Eliminate Federal Funding of Beach Replenishment Projects
Eliminate the Environmental Protection Agency's Energy-Efficiency Partnership
Eliminate Grant Programs that Support Energy Conservation
Eliminate Federal Funding for the FreedomCAR Partnership
Increase Net Receipts from National Timber Sales
Eliminate Federal Grants for Water Infrastructure
Eliminate the Department of Energy's Applied Research for Energy Conservation
Eliminate the Department of Energy's Applied Research for Solar and Renewable Energy Sources
Total Discretionary Savings
Appendix 3 (continued)
Discretionary Programs
Savings ($millions)Option Number BA/O*
521235315142224101122557876
1,0825488881414963459597338
217163150249117
278278
2,6112,611
12711948024610210
191226814
45076
19570
3941735424
3753756161
18355
13050
288243
15,903
9,150
2004
6654824012912862071561138080
1,6542451751751515989860607570
27924419283
11666
287287
2,7092,709
12912548942910499
1951866968
45943320015081062710879
4004006262
187148135125370347
28,462
17,979
2005
6806174113732922651591458382
2,8167123603601515
10010061617672
28827819615111998
296296
2,8152,815
1321305004911061041991957170
468460200185
1,2501,056
1601334304306464
191187140170456434
38,237
26,893
2006
6956764204092992911621588685
2,8741,387
3713711515
10310263627874
297294201183123115306306
2,9302,930
1351345105091081062031997271
478470205200
1,7141,509
2121864604606565
195191140195464458
42,450
33,617
2007
7116984304223063001661638988
2,9382,081
3813811515
10510465648076
306303206197126122317317
3,0483,048
1381375225201111082082047473
489480210205
2,2031,988
2632384954956666
199195145210473469
41,628
36,373
2008
3,2722,7081,9771,6371,4071,164
765634416411
11,3644,4801,3761,376
7474
502438308306382330
1,3871,282
945638575418
1,4841,484
14,11314,113
661646
2,5012,195
530427996806355296
2,3441,9191,010
8106,3715,354
797659
2,1602,160
318318955776690750
2,0511,950
166,685
124,006
2004-2008
7,0826,4494,2823,8993,0442,7721,6481,503
909899
27,05518,4773,4563,456
157157
1,0901,030
655655807735
3,0762,9532,0521,7051,2501,0733,2413,241
31,37231,3721,3971,3795,2874,7011,1201,0062,1041,893
750684
4,9544,4812,1401,910
18,38217,2172,8602,6165,2505,250
672672
2,0161,8171,4651,9004,5484,431
367,116
326,776
2004-2013
page 22
No. 1733 March 10, 2004
Appendix 3c B 1733
270-05 Restructure the Power Marketing Administrations to Charge Higher Rates270-06 Sell the Southeastern Power Administration and Related Power Generation
Equipment270-08 Reduce the Size of the Strategic Petroleum Reserve270-09 Require the Tennessee Valley Authority to Impose a Transmission Surcharge
on Future Electricity Sales300-03 Reauthorize Holding and Location Fees and Charge Royalties for Hardrock
Mining on Federal Lands300-07 Open the Coastal Plain of the Arctic National Wildlife Refuge to Leasing350-01 Eliminate the Foreign Market Development Program350-02 Eliminate the Market Access Program350-03 Reduce the Reimbursement Rate Paid to Private Insurance Companies in the
Department of Agriculture's Crop Insurance Program350-04 Impose New Limits on Farm Program Payments to Producers of Certain
Agricultural Commodities370-05 Charge All Banks and Thrifts Deposit Insurance Premiums400-02 Eliminate the Essential Air Service Program500-03 Eliminate Interest Subsidies on Loans to Graduate Students500-04 Raise Interest Rates on Federal Student Loans500-05 Increase Up-Front Fees on Unsubsidized Loans to Dependent Students and
Their parents500-06 Restrict Eligibility for Subsidized Student Loans by Including Home Equity in
the Determination of Financial Need500-07 Eliminate the Floor on Lenders' Yields from Federally Guaranteed Student
Loans550-01 Reduce the Enhanced Federal Matching Rates for Certain Administrative
Functions in Medicaid550-02 Restrict the Allocation of Common Administrative Costs to Medicaid550-03 Reduce Spending for Medicaid Administration550-04 Convert Medicaid Payments for Acute Care Services into a Block Grant550-05 Convert Medicaid Disproportionate Share Hospital Payments into a Block
Grant550-06 Require All States to Comply with New Rules About Medicaid's Upper
payment Limit 2004550-07 Reform the Process for Listing Drug Patents in the FDA's Orange Book550-08 Eliminate the 30-Month Stay for Late-Listed Patents550-10 Finance the Food Safety Inspection Service Through User Fees550-12 Base Retirees' Health Benefits on Length of Federal Service570-01 Reduce Medicare's Payments for the Indirect Costs of Patient Care That Are
Related to Hospitals' Teaching Programs570-02 Reduce Medicare's Direct Payments for Medical Education570-03 Eliminate Additional Capital-Related Payments for Hospitals with Residency
Programs570-04 Convert Medicare Payments for Graduate Medical Education into a Block
Grant and Slow Their Growth570-05 Convert Medicare Disproportionate Share Hospital Payments into a Block
Grant570-06 Expand Global Payments for Hospitals' and Physicians' Services Provided
During an Inpatient Stay570-07 Further Reduce the Medicare Prospective Payment System Update Factor for
Hospitals' Inpatient Operating Costs570-08 Further Reduce Medicare's Payments for Hospitals' Inpatient Capital-Related
Costs570-09 Increase the Number of Post Acute Care Discharges Treated as Hospital
Transfers Under Medicare570-10 Reduce Medicare Payments for Currently Covered Prescription Drugs570-11 Require Competitive Bidding for High-Volume Items of Durable Medical
Equipment570-12 Increase Medicare's Premium for Supplementary Medical Insurance to 30
Percent of Benefit Costs570-13 Tie Medicare's Premium for Supplementary Medical Insurance to Enrollees'
Income570-14 Index Medicare's Deductible for Supplementary Medical Insurance Services570-15 Simplify and Limit Medicare's Cost-Sharing Requirements570-16 Restrict Medigap Coverage of Medicare's Cost Sharing570-17 Combine Medicare Cost-Sharing Changes with Medigap Restrictions570-18 Collect Deductible and Coinsurance Amounts for Clinical Laboratory Services
Under Medicare570-19 Reduce Medicare Payments for Home Health Care570-20 Impose a Co-payment Requirement on Home Health Episodes Covered by
Medicare
Appendix 3 (continued)
Mandatory Programs
Savings ($millions)Option Number
OO
OO
O
OOOO
O
OOOOO
O
O
O
OOOO
O
OOOOO
OO
O
O
O
O
O
O
OO
O
O
OOOOO
OO
BA/O*
00
3670
25
0246
48
156
1,40081
62524075
60
340
970
2802,1503,170
680
2,770
102
35080
2,600
800200
400
730
100
900
500
300
4500
3,520
1,310
100970
1,8602,980
670
2801,000
2004
1600
376270
25
031
10152
180
1,60011395036085
90
545
1,180
3202,5606,380
760
1,940
307
720170
3,000
1,000200
700
1,120
100
2,000
600
400
70020
5,380
2,030
2001,4802,8304,5301,040
7901,600
2005
1601,900
386270
25
1,70035
14054
187
90011598551550
95
880
1,520
3902,980
11,940850
1,170
8018
750270
3,200
1,000200
900
1,460
100
3,200
600
400
71060
6,050
2,460
3002,2903,0305,5401,120
1,4001,800
2006
160-112
395270
25
035
18855
180
500118
1,01073520
95
1,280
1,620
3903,410
17,860930
890
18031
780380
3,500
1,000200
1,200
1,810
100
4,500
700
400
790110
6,610
2,920
4002,7303,2206,1901,200
2,1602,000
2007
160-115
405270
25
40035
20056
180
400119
1,03081520
95
1,425
1,740
3903,880
24,6801,000
560
30046
800510
3,700
1,000200
1,600
2,190
100
6,000
700
500
920160
7,130
3,360
6003,1303,4406,8201,290
2,5602,300
2008
6401,673
1,9291,080
125
2,100160635265
883
4,800547
4,6002,665
250
435
4,470
7,030
1,77014,98064,0304,220
7,330
590104
3,4001,410
16,000
4,8001,000
4,800
7,320
500
16,600
3,100
2,000
3,580360
28,680
12,080
1,60010,61014,39026,0705,330
7,2008,700
2004-2008
1,1401,060
1,929
2,430
250
2,150335
1,635565
1,654
6,6001,168
10,0057,090
350
910
12,135
18,000
3,72043,580
318,07010,480
7,330
4,410719
7,9006,390
38,500
10,5002,500
18,400
25,030
1,500
75,700
6,900
4,800
10,8901,480
75,370
39,800
8,30036,58036,51075,53013,440
25,42024,900
2004-2013
page 23
No. 1733 March 10, 2004
Appendix 3d B 1733
600-03 Eliminate Small Food Stamp Benefits600-04 Target the Subsidy for Certain Meals in Child Nutrition Programs600-05 Reduce the $20 Exclusion for Unearned Income Under the Supplemental
Security Income Program600-06 Create a Sliding Scale for Children's SSI Benefits Based on the Number of
Recipients in a Family
Appendix 3 (continued)
600-07 Reduce the Federal Matching Rate for Administrative and Training Costs in the Foster Care and Adoption Assistance Programs
600-08 Limit Some Cost-of-Living Adjustments for Federal Retirees600-09 Modify the Formula Used to Set Federal Pensions700-01 Narrow the Eligibility for Veterans' Disability Compensation to Include Only
Veterans with High-Rated Disabilities700-02 Narrow the Eligibility for Veterans' Disability Compensation to Veterans
Whose Disabilities Are Related to Their Military Duties700-03 Increase Beneficiaries' Cost Sharing for Care at Nursing Facilities Operated by
the Department of Veterans Affairs700-04 Establish a Realignment and Closure Commission for Department of Veterans
Affairs Facilities700-05 Reduce Veterans' Disability Compensation to Account for Social Security
Disability Insurance Payments800-02 Require the Internal Revenue Service to Deposit Fees from Installment
Agreements in the Treasury as Miscellaneous Receipts920-01 Charge Federal Employees Commercial Rates for Parking920-03 Impose a Fee on the Investment Portfolios of Government Sponsored
EnterprisesTotal Mandatory Savings
550-11 Adopt a Voucher Plan for the Federal Employees Health Benefits Program300-04 Set Grazing Fees for Federal Lands on the Basis of State Formulas300-05 Recover Costs Associated with the Issuance of Permits by the Army Corps of
Engineers300-08 Impose a New Harbor Maintenance Fee400-04 Increase Fees for Certificates and Registrations Issued by the Federal Aviation
Administration400-05 Establish Fees Based on Costs for Air Traffic Control Services400-06 Impose a User Fee to Cover the Costs of the Federal Railroad Administration's
Rail Safety Activities
Note: Some options overlap, which mean total savings from implementing all options would be less than the listed totals.For an explanation of the options, see CBO's "Budget Options," at www.cbo.gov/showdoc.cfm?index=4066&sequence=0.
400-03
400-07
400-08
Total Mixed/Other Savings
Eliminate Grants to Large and Medium-Sized Hub Airports
Eliminate Funding for "High Priority" Highway Projects
Eliminate Funding for the "New Starts" Transit Program
Mandatory Programs
Savings ($millions)Option Number
OOO
O
O
OOO
O
O
O
O
O
OO
O
BAOBAOBAOOOO
OO
OO
BA
O
BA/O*
908590
0
125
2007073
18
214
0
1,175
83
1401,480
37,422
1,360251
1,778190
1,593239700
510
1505
2,0000
4,731
3,550
2004
90555135
70
155
490130140
62
221
-15
1,221
84
1401,554
53,757
1,360811
1,778653
1,624721
1,7001020
2295
2,00045
4,762
6,194
2005
90655125
135
160
790185209
97
229
-35
1,255
85
1401,631
69,936
1,3601,1161,7781,0761,6591,0542,500
2021
2085
2,00092
4,797
8,092
2006
90670115
130
160
1,120235250
118
236
-54
1,292
86
1501,713
79,476
1,3601,2711,7781,3381,6931,3153,300
2221
1915
2,00093
4,831
9,556
2007
95680130
150
165
1,470295281
154
241
-53
1,331
87
1501,798
94,100
1,3601,3641,7781,4771,7311,5344,300
2322
1725
2,00095
4,869
10,992
2008
4552,650
595
485
765
4,070915953
449
1,141
-157
6,273
425
7208,175
334,755
6,8004,8138,8904,7368,3004,863
12,5008694
95025
10,000325
23,990
38,392
2004-2008
9506,1251,260
1,345
1,615
17,5503,4853,395
1,645
2,476
1,642
13,645
875
1,54018,610
1,080,213
13,60012,37517,78013,04417,54013,62849,500
159217
1,56950
20,000827
48,920
111,369
2004-2013
Mixed/Other Programs
