Guidelines to Help Congress Cut Spending

VOTING to approve the general idea of a balanced budget is a fine start on the path of fiscal sensibility, but only a start.

The really tough job ahead is to identify the specific spending cuts that should be made and to attract sufficient public support for such tough action.

Powerful interest groups push very hard for the particular spending programs that benefit them.

Few legislators or presidents want to stand up against a strong one-issue group of voters. And for good reason. Cutting any specific program will not close the gap between federal revenues and expenditures. Yet the very attempt to do so could result in the defeat of those identified with the effort.

The solution may lie with an innovative concept designed by Rep. Dick Armey (R) of Texas to eliminate obsolete military bases. Under that approach, a bipartisan blue-ribbon commission recommends an array of facilities to be closed, and Congress has to take an up-and-down vote on the entire package.

In this spirit, a bipartisan commission on federal expenditures should be charged with coming up with a specific set of federal program reductions and terminations for the first decade of the 21st century. Congress would be required to vote on the entire proposal, making no exceptions for individual programs.

This approach appeals to our basic sense of fairness. When everybody's ox is getting gored, nobody can say they are being picked on. What about preparing guidelines to assist the commission in its task?

Here is one for starters. For a country with the low saving and investment levels of the United States, reductions should focus more on the large consumption part of the federal budget rather than the small investment component. Such an emphasis would curb the present tendency for federal deficit financing to be a powerful mechanism for converting private saving into public consumption.

Virtually the entire increase in federal outlays since 1980 has been consumption-type spending, aside from defense and interest on the national debt. A lower deficit should foster economic growth by making more funds available for private investment, at the expense of publicly financed consumption.

A second guideline is to home in on subsidy programs that provide special benefits at the expense of the national taxpayer.

Contrary to widespread belief, the word "farm" does not always precede the term "subsidy" in the federal budget. Subsidies to agriculture are very large, true. But generous subsidies to business, labor, and other interests are also provided.

A third guideline is to avoid funding-expenditure programs designed to offset problems created by other federal activities, such as regulation. A more cost-effective way of dealing with the problem is to change the original rule or regulation that gives rise to the problem.

Governmental regulatory and mandated burdens on employment are rarely considered in relationship to the expensive array of government job programs that offset their adverse affects. Yet the record of these offsetting programs - ranging from job training to unemployment compensation - is not heartening.

The society would be far better off by a combination of regulatory reform and expenditure reductions. Such a targeted and combined effort would also contribute to reducing the gap between the government income and outlay.

A fourth guideline is to privatize activities that should properly be the responsibility of the private sector. We need to go beyond the notion of having the private sector produce items under government contract, since contracting out still leaves the activity in the federal budget.

A fifth guideline is to introduce economic-efficiency considerations in preparing and reviewing the budget. Agencies should be required to charge competitive, market-interest rates for all federally provided credit. That will quickly reduce the demand for subsidized borrowing.

The federal budget contains a hodgepodge of special benefits, inefficient programs, and low-return outlays. A blue-ribbon commission, along the lines of the Armey base-closing commission, is needed to identify on an objective basis the low-priority expenditures that should be weeded out.