Q- Were they successful?
A- Before the August recess in 1989, the House passed all 13 appropriation bills but never met on conference with the Senate on most of them and many committees never got around to appointing conferees. The House had to pass a continuing resolution on September 27,1989 to keep the government running until Oct 25th ---one month.
Q- And, as we said earlier, that was what most people saw on the TV screens during the nightly newscasts. I remember that many people urged President Bush to veto the continuing resolutions. What would have been the consequences if he had listened?
A- Gramm-Rudman's (a piece of legislation discussed in the previous file also) often threatened sequester would have kicked in. But instead we had a dreadful display of irresponsibility.
It reminded congressman Fred Upton of the 1986 omnibus bill in which members of the House had one hour to look over that gigantic tax bill before voting---a bill that was to affect the lives of millions of citizens . The bill was brought into the House in a box used for xerox paper with the papers held together by rubber bands and string---one pile for the Republicans and another for the Democrats.
He remembers (and I do too) how House members came up and riffled through the pages to make certain their special pork was included and that was all the perusal the bill got. Not one person could say he was familiar with everything that was in that bill, but that didn't stop them from voting for it so they could leave town.
Q- What if the committees couldn't meet their goals and the process had to go to sequester?
A- That would have meant dividing what turned out to be a $16.1 billion cut equally between defense and non-defense discretionary spending. In effect that would have meant a five percent cut in all proposed increases in non-defense discretionary spending (remember the previous years' spending heights are always guaranteed again by the continuing resolution) and because of the larger base of defense, a four percent cut in defense.
Q- I understood defense was not due for any increases anyway. But what do you mean by "non-defense discretionary"?
A-Also called "domestic discretionary", the term refers to non-defense programs that require annual approval by Congress. The FY1990 budget contained almost $200 billion worth of non-defense spending which legislation directs Congress to cut back until the FY1990 Gramm-Rudman targets are met; i.e. reduce by $8.5 billion.
Entitlement programs such as social security, government pension payments and safety nets for the poor are not discretionary (do not require annual approval )and are exempted from cuts.
That accounts for the relatively small portion of the more than $1.2 trillion budget which is left to the discretion of Congress. Because Congress failed to exercise its discretion in a timely fashion over the entire budget, much of that discretion was lost.
Q- Wasn't there an April deadline for some budget submittal? I remember someone claiming the bipartisan agreement reached on April, 14 1989 "Did not represent a bold approach to deficit reduction?
A- That was my congressman. On that date the budget-elite on Capitol Hill staged a media event to congratulate themselves on their new bipartisan spirit of compromise.
When asked to explain this spirit of compromise Leon Panetta, Chairman of the House Budget Committee replied, "We've accepted the President's numbers on revenue and they've moved towards the Congress on the spending side." Oy veh! Rosy numbers in exchange for more spending. They called it compromise but as taxpayers, we'd been had!
Q- What do you mean by "the President's numbers"?
A- The administration's Office of Management and Budget (OMB) figures are generally more optimistic as to the rate of growth, interest, inflation and unemployment than are those of the Congressional Budget Office (CBO). So even though many members of Congress scoffed at the OMB numbers they were embraced either in a "spirit of compromise" or because they made the Gramm-Rudman (G-R) target of $100 billion deficit in FY1990 easier to reach.
Q- What do you think?
A- When you think about it, one is part of the other---compromising makes it easier. Not only that, the 1987 revision of the G-R legislation called for the use of OMB figures instead of CBOs, so the "acceptance of their figures" was hardly impressive.
To hit that FY1990 G-R target, somewhere between $25 billion and $30 billion had to be negotiated in either spending cuts or new revenue or a combination of both. There were plenty of places to cut spending.
For starters the negotiators could have looked at $8 billion worth of subsidies for farmers whose gross incomes exceed $100,000 annually, or at the $1 billion in cost of living adjustments (COLAs) for retired veterans, civil service and military personnel and billions more in medicare payments to those who can well afford their own health care. But then maybe they did look.
The compromise did away with $17 billion of George Bush's proposed reductions in spending dealing with COLAs (cost of living adjustments) for civil and military retirees and substituted $6.8 billion cuts in health, agriculture and postal reforms.
The proposed reduction in medicare administration was whittled down to $2.7 billion from $5.3 billion. So much for meaningful spending cuts.
Q- I'm glad they reversed Bush's scheme to reduce pensions---especially for the military. The people who would have been affected had already agreed to trade lower cash compensation in the present for cola pensions in the future. I know enough about contract law to know one party can't change the terms after another party has performed based on the original terms.
A- The administration's proposal to raise additional revenue via reduced capital gains rates was also given the cold shoulder. Touted as a "tax cut for the rich" by its opponents, it's strongest champion, the indomitable Richard Darman (Head of OMB) countered with his own one-liner, referring to the cuts only as "incentives for investment and growth".
As Jim Sasser, Chairman of the Senate Budget Committee put it, "A cut in capital gains has two chances of passing; slim and none."
Q- So what did they do?
A- The negotiators preferred to get their revenue from the ol' bag of tricks. They pulled out more bookkeeping gimmicks such as moving $850 million in agricultural subsidies into 1989 to dress up the 1990 ledger, cancelling $500 million worth of lost or damaged food stamps, moving the Post Office off budget, selling government assets and ---
Q- I get the picture. I've heard those kinds of shenanigans referred to as smoke and mirrors.
A- All this even though revenue from the sale of government assets and short term savings that come from shifting outlays to the next fiscal year couldn't be used to reach the G-R target.
Q- Why not?
A- That's the way the Gramm-Rudman legislation was written. But these paper outlays were not shifted to the next fiscal year; they were shifted to the previous fiscal year!
Q- But didn't that increase the FY1989 deficit?
A- Sure, but that was ancient history. Number crunchers turned their full attention to manipulating the FY1990 deficit in order to meet the $100 billion mark, or $110 since the law allows a $10 billion leeway.
Q- I've heard a lot of people claim that our budget problem is due to our declining resources. Do you agree with that?
A- It would depend on what is meant by resources. I would stipulate to declines in human resources due to declines in education, training, work ethics, integrity, morals and the increase in substance addictions. Any decline in physical resources, including a decline, in savings and even our infrastructure, can, I believe, be traced to the human resources decline.
Q- To focus on just one area for a moment---why the decline in savings?
A- Again, an entire book could be written on this "one area". Naturally there is less need to save as we move closer and closer to a welfare state. Keeping within the budget context however, the immense amount of borrowing that goes on in this country is against savings. A high deficit as a percentage of GNP is fine if savings are equally high, as they were until recently in Japan.
Q- You know when I look at this budget process it seems that congress has the first and the last word. Congress is the body that initiates the law-making process by passing legislation and also has the last word with its power to override any presidential veto.
A- That's true. The presidential veto provides an opportunity for a second look and, in keeping with the spirit of checks and balances, was intended as a curb on hasty legislation. Congress was originally expected to provide lump-sum ceilings on expenditures and the executive branch was to determine how the funds would be spent.
Q- That certainly has changed.
A- But what most people don't realize is that even though recent budgets have passed the trillion dollar mark, half of that amount was committed long ago in the form of entitlements and interest on the debt, so its dispersal is pretty much automatic. Controversy surrounds only the smaller portion of discretionary spending.
From George Washington until Richard Nixon's last year in office, presidents had the power to impound. The president's power to impound monies was the only way, aside from a presidential veto, that the executive branch could check the otherwise unbridled spending power of the legislative branch. In 1974 congress reformed the budget process and destroyed the impoundment power of the executive.
Q- What does impound mean?
A- The refusal to spend appropriations. Although the president has consistently and emphatically been denied the line-item-veto, there are still two means congress created for the executive to make narrow changes in the budget. Those are recision and deferral. The trouble is each recision vanishes just like Cinderella's coach, unless congress approves it within 45 days.
Q- Hold it! Hold it! What is a recision?
A- A recision is an annulment or cancellation. In two budgets Ronald Reagan included 327 recisions equal to $12.6 billion in potential spending.
Q- What happened?
A- Most were simply ignored by congress.
Q- And deferral?
A-President Reagan was sued after requesting that $251 million for urban development grants be deferred in 1986. The House appropriations committee had already voted to kill his deferral authority. What was known as the federal spending control initiative and nick named the "pork buster", was introduced into congress on September 17, 1985 by the Senator Dan Quayle.
Q- Obviously a technique to get the "pork" out of government budgets.
A- Obviously. It permits a recision of spending authority to be enacted if the President and both Houses of congress agree. The legislation would guarantee congressional action on executive proposals to reduce or eliminate line-items in specific appropriation measures. It eliminates the ruinous 45 day automatic lapse used by congress to avoid reviewing and taking a stand on presidential recision proposals.
Congress had been trying to weaken the president's authority over budgeted spending for years and years and it succeeded in doing just that with the passage of the Impoundment and Budget Control Act of 1974.
Q- That was when President Nixon was stuck in the mire of Watergate.
A-The legislation was ostensibly to bring expenditures into line with revenue. It established the current budget process by creating the budget committees, the Congressional Budget Office, budget resolutions and the reconciliation process. The Act called for Congress to pass each year 13 different appropriation bills by specific deadlines.
Q- What happens when Congress fails to meet those deadlines?
A- There is no penalty for individual members, but the whole country suffers as continuing resolutions and gigantic omnibus bills are hastily passed.
When a president receives an appropriation bill loaded with pork, his alternatives are to veto the entire bill--condemning the good along with the bad---or bite his tongue and sign.
The executive's party will not let him take that chance. So rather than vetoing the so-called "Bomb of '86" (Bloated Omnibus Money Bill), Ronald Reagan on November 17, 1986, tacked the following statement onto his signature ratifying H.R. 5363:
"Although I am signing this bill, I am very troubled by the inclusion of an unrelated, last-minute amendment to the Bankruptcy Code. The Congress' decision to link such provisions to otherwise desirable and useful legislation is but one example of the highly objectionable practice of combining unrelated legislation in a single bill. This practice, at a minimum, violates the spirit of the Constitution by restricting the President's veto power."
Ronald Reagan put his foot down in 1988 and congress met the appropriation deadlines without resorting to sordid continuing resolutions.
Q- I understand that Ronald Reagan talked a good game but never used the muscle he had as the Executive to back up his rhetoric.
A- It's true he used the veto less than any president, at least in recent history.
Q- George Bush doesn't have that problem. In his first 16 months President Bush vetoed eleven bills.
A- I would just like to add here that surprisingly, liberal Senators Paul Simon of Illinois and Howell Heflin of Alabama support a line-item veto for the president. Even Senators Kennedy and Biden offered their own statutory (as opposed to constitutional) version, known as "enhanced recision". The enhanced recision received 40 votes after being introduced by Senator Dan Coats in 1989.
Q- Unfortunately Senator Robert Byrd of West Virginia absolutely abhors the item-veto because it would curb his pork-barrel power as chairman of appropriations.
A- In 1988 Senate Minority Leader, Bob Dole wrote a letter to the Wall Street Journal saying how at the beginning of every congress since 1977 he had introduced a bill giving the president the line-item veto---to no avail. In 1988 he decided to go along with those constitutional scholars who have been urging presidents to act as if they have line item vetoing power and force the congress to test the constitutionality of the action in court.
There is reason to believe that when writing the Constitution, Madison was aware that congress might try to escape a presidential veto by the use of omnibus legislation, as they are doing today, and he provided a remedy in Article I, Section 7, Clause 3. There the President is given the power to veto "orders, resolutions and votes" which have already been approved by both the House and Senate. No president has ever used the veto power except on bills.
Q- And some people think it would be a stupid stunt to pull. It would be an open battle for power between two branches of government.
A- Many people say the 1974 Impoundment and Budget Control Act was a power play between congress and the executive. Congress was the clear victor when that legislation passed without a whimper from the mortally wounded Richard Nixon.
Q- Congress may have been the victor, but the American people were losers. Our debt has been spiraling out of control ever since. Although cause and effect are not clear it seems plausible that there is more than a coincidence here.
A- Well we know even though he was constantly urged to do so, Ronald Reagan never launched a test case and although George Bush has seemed ready for the challenge on several occasions he still hasn't made a move.
Q- There will probably never be a better time for a test case as far as the executive branch is concerned.
A- I suppose you're referring to the conservative learnings of the current high court.
While we were talking I found the letter I referred to earlier. Listen to what Senator Dole said in January, 1988:
-
"We have a budget disaster on our hands. From 1980 to 1988 the federal
debt has grown rom $908.5 billion to $2.6 trillion. Americans now realize
that time is of the essence in solving the budget mess. . .The spectacle of
the president having to veto hundreds of pages of good legislation to
eliminate a few unwise provisions is an exercise in poor government
and, if the Constitution is to be believed, totally unnecessary. . .let the
courts help blow the whistle on the congressional pork-barrel game."
Q- That's incredible! He was talking about a disaster when the debt rose a little over one and a half trillion over eight years and four years later we've added another one and a half trillion.
A- $2.6 trillion to a debt ceiling currently of $4.1 trillion looks like we're accelerating the debt spiral at double the previous rate.
Q- We're spinning out of control twice as fast as when one of our most powerful senators called the debt a disaster. I see why you're so frustrated----no one's listening---no one seems to be out there. H-E-L-P!
A- This should make you sit up and take notice: Debt grows at $6,000 per second!
Q- Ouch!
A- Now tell a friend and ask him to repeat it and maybe we can do something about this mess before it's too late.
Q-There was a lot of talk about cuts in medicare at the end of 1990.
A-Talk with no substance.
The budget compromise bill passed the end of 1990 for FY 1991 provided mammography screening for 18.7 million women on medicare (additional estimated 5-year cost of $1.25 billion) regulated medigap insurance polices (adds federal penalties up to $25,000) and prices medicaid pays for prescription drugs (hurt drug companies by supposed to save government $1.9 billion over 5 years), provided more home-care service for low-income frail and elderly (authorizes $580 million for program over 5 years) and expanded help for low-income people in general, all to the tune of $22 billion (supposedly over 5 years)
Q- I heard that the Bush administration cut medicare funding in that budget.
A- Most of the dollars allocated to Health and Human Services is mandatory spending--all Darman was trying to do with medicare was restrain the rate of growth. Just memorize the phrase "decrease in the increase"---that's as close as congress gets to a "cut". Anyway you look at it, it's an increase as you and I know it.
Q-Weren't the premiums and co-payments raised for medicare recipients?
A-There was a proposal in the FY1991 budget that persons with incomes above $125,000 a year pay 75 percent of the true cost of their medicare insurance premiums ($63.60 per month) instead of only 25 percent of the cost ($31.80) as is now the case. But nothing ever came of it.
Q- That's news to me! I never knew government was picking up the tab for 75 percent of the real cost of medicare premiums. That was supposed to be a voluntary self-sufficient program, not a welfare subsidy. There are many elderly people who don't begin to need the financial help as much as their grand-children do in trying to afford an education, a home or even a family.
A- Why the premiums should be subsidized at all is beyond me. We're not talking about return of monies paid into the social security system as in payroll taxes you understand. In the early eighties Ronald Reagan suggested that those choosing to participate in the medicare program raise their premium payment slightly from 25 percent of the real cost, to cover 35 percent of the real cost, and lobbyists for the elderly had him running for cover.
Q- Besides, states are now required to pick up 100 percent of the cost of premiums and co-payments and deductibles for medicare beneficiaries below the poverty line. The system is already targeted to protect the poor.
A- That only began in 1991. By 1995 states will have to pick up premiums for those living on up to 120 percent of the poverty-line income. This is a perfect example of how mandates from Washington play havoc with state and local budgets. That one little "do-as-I-say" is expected to cost states $387 million over 5 years.
Q- I understand that same legislation increased the Earned Income Tax Credit.
A-That's right. Six billion dollars was to be paid to ten million low-income families. The idea is to help working families with meager incomes. The 1990 maximum benefit to a family was $953, that can reach $1,583 in 1991 and is set to rise to $2,000 by 1994.
The five year cost here is supposed to be $13.1 billion with a huge increase anticipated after 1994. Low-income working families with children will also get tax credit of six percent of eligible earnings or a maximum of $426 in 1991 in order to purchase health insurance for their children. The anticipated five year cost is $5.2 billion.
Q-How could spending increases end up in a bill aimed at cutting spending?
A-According to California Congressman Henry Waxman "because of pent-up frustration". Ohio Congressman Willis Gradison said they knew Republicans would never support the budget agreement no matter what the Democrats did, so they added even more liberal provisions to attract the maximum number of votes from their own party!
Q-Were any special provisions made for children in the FY 1991 budget?
A- Medicaid for children was expanded to include coverage to all children up to age six who live in families with incomes up to 133 percent of the poverty line.
Q- How do you determine the poverty line?
A- Poverty thresholds were first established in 1961 when the Social Security Administration, along with the Department of Agriculture determined the income necessary to feed adequately (a subjective term to say the least) the number of children and adults in any given household and arbitrarily multiplied by three.
Q- You're kidding---right?
A- I know what you're going through. We all want to believe that they really know what they're doing out there. That the hundreds of formulas which permeate all of our lives are based on truth and not doodles on some bureaucrats' desk.
Q- Welcome to the real world, huh? So do you happen to know, based on this not so omniscient formula, the maximum number of dollars a family of three could make and still qualify for medicaid for their child?
A- The poverty line in 1991 for a family of three is just under $10,000 so 133 percent would allow incomes of roughly $13,147.
By 1995 700,000 more children should be added to the program and by the year 2002 states will have to cover kids six through eighteen which will add millions more kids. This is all supposed to cost $1.1 billion over five years.
Q-Sure it is! They really know how to predict things like that in Washington, D.C.! Remember the line they used in order to talk recalcitrant voters into supporting medicare---it would only cost $8 billion in 1983.
A- And the actual cost in 1983 was $38.2 billion---slightly short of the prediction. I was the one who told you that!
Q- This is another instance of federal legislators telling state legislators how they must run their social programs, what they must spend on whom and then leaving them to locate the resources to comply. This represents a mammoth expense for state and local governments, especially now that state and local governments no longer have the surpluses they once did.
A- That's an understatement. California wrestled with a $14 billion deficit in the summer of 1991, and it's easy to see why. Aside from attention getting propositions like proposition 13, which limits the state's ability to raise revenue, and proposition 98 which restricts the use of revenue by requiring 40 percent be appropriated for education, let's look at a very modest proposition as symptomatic of the problem. Proposition 117 authorized $30 million a year for 30 years; tax dollars that can be used to purchase habitats for deer, lions, and numerous endangered species. A good cause, right?
Q-At least a majority of California voters favored it.
A- The point is, there is no end to good causes.
Q- $30 million a year is a mere drop in the bucket if you're talking government budget problems. If you want to highlight problems, look to the pension systems. More than 6,000 state and local retirement programs cover about 12 million public employees.
The unfunded liability of state pension debt has been estimated at more than $1,000 for every American adult. New York City has a liability exceeding $3 billion; Bostons' liability comes close with every citizen in those cities liable for almost $2,000 in pension promises.
A- In the mid eighties a community outside Detroit with a population of about 30,000 was channeling 99 percent of the city-property-tax revenue into the retirement funds of the police and fire fighters.
Time magazine reported that one city employee had only contributed $35 to his retirement plan but was able to collect $250,000 in benefits after retiring.
A-The trouble with politicians acting as agents on behalf of taxpayers is that they are not using their own money. They acquiesce to terms where public employees are allowed to keep their jobs indefinitely without threat of dismissal and collect close to full salary, indexed to cost of living, when they retire with the cost to be born by citizens in the future.
Most private sector pensions are not fully indexed to the cost of living as are public plans. There are real accountability and generational equity questions here.
Q- What about federal pensions?
A- The civil service pension system provides benefits which in the private sector would only be reserved for top executives. In 1984 the Congressional Budget Office (CBO) estimated that $5.2 billion in outlays could be saved over the next five years (1984-1989) by slowing the rate at which benefits accrue, reducing the COLA escalator (cost of living increases) and adding penalties for nondisability retirement prior to age 62. But no one was listening.
Every year the Treasury must supplement the pension contributions made by federal employees and the agencies for which they work because in order to achieve such generous retirement benefits the contributions would otherwise be too onerous. These supplements are estimated to cost close to $30 billion this year.
The Office of Personnel Management (OPM) estimates that the government's total liability to current and future retirees totals $514 billion and is rising at the rate of $100 million a day, not counting the military retirement system, which could mean a rise in pension costs of $1 trillion over the next 30 years.
According to the same CBO report, big savings could also have been achieved by making changes in the military retirement system. It was estimated that between 1984-1989 $2.6 billion could have been saved by making employees who retire after 20 years of service wait until they reach age 62 before granting full benefits. It was also suggested that military retirees, still of working age, be given only half the normal COLA.
In addition to the $24 billion that could be cut from pensions, $12.4 billion more could be saved over five years by shrinking the bureaucracy and bringing it more into line with private sector employees.
For instance, comparable private sector employees get an average annual vacation of nine days as opposed to the thirteen days allotted government employees. Little wonder between 1946 and 1984 the number of government employees increased from 1.5 million to 2.1 million. American workers recognize a deal when they see it.
Q- I heard that some former members of congress have pensions in the $100,000 range? Could this be true?
A- I know former Senator Mike Mansfield of Montana is the most famous with a pension of more than $150,000 a year. Former House Speaker, Carl Albert of Oklahoma tops $100,000 and former Senator Al Gore, Sr. is mighty close to it. Former President Nixon receives $38,615 a year from his congressional pension in addition to the $138,900 presidential pension.
Q- How could Mike Mansfield receive so much?
A- Senator Mansfield has an ambassador's pension also. What really amazes me is that crooks can receive pensions.
Q- You mean Richard Nixon?
A- No, I mean two congressmen that were actually convicted of extortion. Senator Harrison Williams gets $53,765 a year even though he was convicted in connection with ABSCAM, and Congressman Mario Biaggi will receive more than $40,000 even while he is serving a prison sentence. Apparently congressional pensions can only be withheld if a someone is convicted of treason.
Q- What is the annual cost for all congressional pensions and what is the average annuity?
A-The congressional pension tab has been running about $13 million a year with an average payout of between $35,000 and $40,000. The National Taxpayers Union figured that the 1991 pay hike of 28.6 percent is expected to add an additional $424,000 in lifetime pension benefits to a typical House member elected before 1985 and an initial annuity of $49,125 after the current term.
Members of congress get back in just their very first year of retirement just about everything they contributed to their pension fund over their active years.
Q- It pays to make your own rules! Public-school teachers don't come under the federal pension system but they are nationwide and their pension liability is increasing on a fast track. In 1988 those unfunded pension costs topped $400 billion.
Promises have been made far in excess of assets, which means we are simply deferring the costs to future generations. To begin paying the full costs of government we would have to assess every man, woman and child at least $10,000 in new taxes immediately or begin to to cut back on the public-sector work force.
A- I think the assessment for your share of all government debt is
more like $20,000, but I don't even bother to add up the numbers the way I
used to do when I heard such vastly different claims.
