Hill Bent on Spending

Do you want the bloated deficit controlled? Look to the members of Congress perched on Capitol Hill, says the Grace Commission report.

Come November 6, all 435 members of the House of Representatives and a third of the Senate, 34 members, are up for election. Who wins these contests could be far more important than who becomes our next president.

As 1985 approaches, taxpayers face the prospect of a $200-billion federal deficit. Walter Mondale blames President Reagan. Congress blames President Reagan. But it was Congress that accepted only half of Reagan's proposed budget cuts for 1983 and none for 1984.

It is Congress that sits athwart most government spending cuts. This may, ironically, be the biggest lesson to be learned from the recent exercise in ferreting out waste in the federal budget known as the Grace Commission. It is ironic because when President Reagan asked industrialist J. Peter Grace to head up a team of volunteers from business to probe the government's operations for potential savings, he was asking for an investigation of the executive branch.

The Grace Commission proceeded to do its work, amassing 46 volumes' worth of examples of waste and inefficiency that add up, roughly, to $140 billion a year. This was the subject of an earlier article in REASON, "Battling the Budget Bulge—Gracefully" (May 1983). But as I noted at the end of that article, at least 60 percent (and probably more like 70 percent) of the commission's 2,478 recommendations require congressional approval in order to be implemented. So the likelihood of budget cutting à la Grace, I suggested, makes for a story in itself. A worthy focus of attention is the final report of the Grace Commission, The Cost of Congressional Encroachment.

The commission itself had noticed during its investigation that a very large proportion of government spending turns out to be a result of congressional pressures and legislative mandates that often run directly counter to the best judgment of officials in the executive agencies. Confronted with so much congressional involvement in the management of government operations, Grace's waste-watchers took on this specific problem in a special report.

Consider, as an item, long-standing efforts by the Defense Department to close unneeded military bases. Utah's Fort Douglas, built in 1862 to protect the historic stage route to the West, is an unlikely target of military operations against the United States. Yet it still receives federal funding as a military base. Across the continent, in Virginia, sits Fort Monroe—probably the only active army post in the world equipped with a medieval eight-foot-deep moat around it. Both of these military anomalies have withstood repeated efforts by the Defense Department over the past two decades to close them and transform them into museums. Why? Congress.

Congress may have every constitutional right to so "encroach" on the executive's management decisions, noted the Grace Commission. But that exercise of power is costing taxpayers a bundle. In the case of Forts Douglas and Monroe alone, $10.8 million a year could be saved by shutting down these military anachronisms—a recommended savings that Congress refuses to allow.

Critics often chide President Reagan for citing the Grace Commission's billions when confronted with questions about the deficit. He is smugly lambasted because so many of the opportunities for budget cutting are not in his province, depending as they do on congressional action. The telling point missed by these critics is precisely the extent to which Congress is the problem behind the deficit.

So the $3-billion annual price tag tallied up in The Cost of Congressional Encroachment should be seen as the tip of an iceberg. The commission noted that the examples of waste catalogued in the report did not exhaust all the overspending generated by legislative involvement in executive details. Moreover, meddling in management is but one facet of Congress's large role in federal spending.

Why the congressional impulse to spend? While the Grace report on Congress did not ponder this question, a perusal of its many examples of encroachment shows that they typify three forces that lie behind Congress's contribution to the ever-growing deficit. First, parochial concerns often obscure any national perspective that might enhance efficiency and promote belt-tightening. (And so we have, for example, a military base in every state of the union and in nearly 60 percent of all congressional districts.) Second, legislators have established a symbiotic relationship with career civil servants that thwarts budget cutting. And third, legislators are subject to great pressure from special-interest groups.

We all know that politicians dispense favors. The practitioners of politics are essentially redistributors—since they do not produce, they can only redistribute. What they give to you, they take from your neighbor. This is familiar enough as a matter of theory, but the Grace Commission's Encroachment report is valuable in turning up many earthy examples of real-life representatives doling out taxpayers' dollars.

Unfortunately, this value is blunted in the original report because the commission declined to identify the particular members of Congress and individual projects involved. In the words of Peter Grace, the elected officials who are so big on ways to spend the taxpayers' money are only "the innocent tools of a failed culture." Grace would excuse the individuals because the political system in which they operate encourages them to put narrow interests ahead of the public's at large. By talking to insiders, however (especially Randy Fitzgerald, a consultant to the Grace Commission), I have been able to identify here specific projects and individuals that point to Congress as a major culprit in the ballooning deficits over which those same members of Congress proceed to wring their hands.

Logrolling for Dollars

The constant tension between managerial efficiency and parochial congressional interests is well exemplified in federal water policy. When the Carter administration announced a nationwide plan to reduce the costs of federal water projects in 1978, Congress rushed in with vigor to protect local interests.

Within one day of Carter's proposal to reevaluate the merits of the nation's water projects, the Grace Commission noted, Congress launched a battle to protect its turf. Carter formally asked Congress to delete 18 projects from the 1978 Public Works Appropriations Bill, to provide savings of $177 million for that year. But the House Public Works Appropriations Subcommittee ultimately agreed to only one deletion, with a budgetary saving of $1 million for the year.

Although Carter's proposed cuts accounted for a mere 1.7 percent of the total proposed expenditures included in the Public Works Appropriations Bill, hearings on the bill focused overwhelmingly on the water projects. The total bill carried a $10.2-billion price tag. It included expenditures on energy research and development (including nuclear research and reactor technology development), nuclear-powered naval vessels, uranium-enrichment activities, and the neutron bomb.

Despite the size, scope, and controversial nature of some of these other expenditures, of the 413 witnesses who appeared before the subcommittee to testify on the bill, 333 were present to get in their two cents' worth on the water projects. Of these, 107 were members of the House of Representatives, amounting to a quarter of that legislative body. Nearly three-quarters of the 74 pages in the Congressional Record devoted to discussion of the appropriations bill focused on the water projects being considered for deletion.

The upshot of this concerted congressional opposition was that President Carter was finally forced to accept only $60 million in cuts (9 of the 18 projects), barely a third of the value of those originally proposed for deletion. Even so, the battle wasn't over. The following spring the Public Works Subcommittee restored 8 of the 9 deleted projects following successful lobbying by representatives in the affected constituencies. Carter vetoed the bill but was overridden by Congress.

Of the water projects the Carter administration originally wanted to drop, the Grace Commission reported that three have been completed, another two are nearing completion, and design work proceeds on four. Of those completed or under way, the construction cost has risen from $448 million to $738 million—or, adjusted for inflation, by 13.6 percent.

One dam that failed all cost-benefit tests, the Yatesville Dam, was kept alive by the late Rep. Carl Perkins of Kentucky. Costs rose from $54 million when first proposed in 1977 to $97 million in 1983, or an increase after inflation of 14.9 percent. In case any president might be tempted not to build Perkins's dam, the representative from Kentucky managed to insert in a 1983 supplemental appropriations bill the following: "Hereafter, notwithstanding any other provisions of this Act, appropriations for the Yatesville Lake construction project made available by Public Law 97-257…and Public Law 97-377…shall be obligated to build the Yatesville Lake Project."

This water-project scenario is by no means an isolated case, as the issue of military bases shows. The Grace Commission made what it called a "conservative estimate" of $2 billion as the annual savings to be gained from military-base closings favored by the Defense Department but continually thwarted by Congress. In 1977 the Department of Defense actually slated 17 bases for closure, but as of now Congress has stopped all but three from being shut down.

The saga of the moated Fort Monroe in Virginia has an especially nice twist to it. Congress has persistently stalled on closure of the fort by demanding a series of "impact statements"—first an environmental impact statement, then a socioeconomic impact statement. Maybe the next one to be requested will be a "historic heritage impact statement"?

At one point, the fort was declared a historic monument and was to be opened to the public. But safety regulations require that before this can be done, a complete search be conducted for any buried unexploded munitions.

Such a search, of course, costs money itself. Estimates ranged from the DOD's low of $2.5 million up to a congressional estimate of $32.3 million. The congressional estimate, considered dubious by DOD personnel, finally prevailed. Using this figure, the Army had to agree that satisfying the safety regulation would cost more than it would just to keep the base in operation. (Apparently it is all right for soldiers to work in an area of possible unexploded munitions!) The latest news is that instead of closing Fort Monroe, taxpayers are being socked for new construction expenditures there to the tune of $550,000.

Parochial Profligates

Nor are military bases the only institutions that defy streamlining given a pork-barrel modus operandi. There are 238 subsidized grocery stores in this country, costing the taxpayers some $758 million annually. True, they are connected to military bases, but the expense of these "commissaries" has been regularly criticized by the federal government's "watchdog," the General Accounting Office (GAO). And by now the story's ending is known—tenacious members of Congress have saved them.

The commissaries are a case study in the gradual perversion of the original justifications for a government policy. They were started in the early 19th century to provide goods to garrison troops in places remote from stores. Their object was to charge the prices that would normally prevail in a soldier's home town. Somewhere along the line, the requirement of remoteness was dropped, along with the concept of prices equivalent to home-town prices. Today, prices are quite low, courtesy of a taxpayer subsidy—the services use base funds to build the commissaries, buy their initial stocks, and pay the salaries of the stores' staffs.

The unnecessary nature of these commissaries except as a special perk is exemplified by those in the Washington, D.C., area. Seven commissaries serve the area, though within a three-mile radius of six of these commissaries, there are 88 commercial grocery stores or supermarkets. The commissary of the Bolling Air Force Base in Maryland bragged in the base newspaper that its prices were "25 to 34 percent below" normal prices. The same newspaper announced it had received a "$450,000 enhancement" (that is, taxpayers' money) that had allowed it to expand its deli and bakery and add a health-food bar. Yet there are plenty of nonsubsidized grocery stores and supermarkets in the area.

The General Accounting Office has called for the closure of all commissaries in urban areas, and the Defense Department does not actively defend them. Congressional action has kept them alive and well, in response to powerful interest-group support.

All the while, politicians have engaged in some real political entrepreneurship here. The political constituency for the subsidized outlets has been gradually expanded by extending the eligibility to use them from active service personnel to veterans, retired service people, and spouses and families of base employees. An estimated 40 million people are now eligible to use these state-owned, heavily subsidized Pentagon supermarkets! The latest move, with a bill introduced in the Senate in 1983, is to allow reservists to buy their food at these government stores, expanding their clientele by another million or so. And work is currently under way to build or renovate 25 commissaries.

Parochial congressional interests hinder executive streamlining endeavors outside the military, as well. After President Reagan fired striking air traffic controllers in 1981, new controllers had to be trained. The Federal Aviation Administration (FAA) said its existing Oklahoma training center could carry the extra load. But Sen. Mark Andrews (R–N.D.) saw a golden opportunity to bring some goodies to his district at the expense of the rest of US taxpayers. As the Grace report described it (having omitted the name of this "innocent tool of a failed culture"): "Language was inserted in the Transportation Department's 1982 money bill setting aside $4 million for construction at the University of North Dakota, in his home state, of an air traffic control (training) center, even though the FAA and Department of Transportation believed it could not be completed in time to be of any use in the aftermath of the strike. Even so the facility was built."

In another clear case of pork-barrel politics, New Hampshire Sen. Warren Rudman (R) intervened to demand continuation of a research project being conducted in his state. The Department of Health and Human Services (HHS), which had been funding the project, had decided to cancel it on the advice of a consultant, determining that the project had been overly ambitious and would not yield useful results. When officials refused to accede to Senator Rudman's request for more funds, he used his influence in the Senate Appropriations Subcommittee that covers HHS. He had them push for a law requiring the department to "continue funding for this research effort at an amount necessary to keep the project on schedule, but no less than $400,000."

On another front, repeated attempts to close low-priority offices of the government-owned and -operated weather service have been thwarted in Congress. A proposal by the National Oceanic and Atmospheric Administration to close 52 unnecessary offices was rejected by Congress in 1979, 1980, and 1982. In 1983, Congress turned thumbs down on a measure to save $3.8 million a year by closing 63 unnecessary offices, once more illustrating the stranglehold of parochial interests.

Behind-the-scenes research shows that one of the most tenacious fighters in this resistance to the closure of obsolete and unnecessary weather stations has been Rep. Virginia Smith (R–Neb.). In March 1982 Commerce Secretary Malcolm Baldrige made the case for mothballing 18 stations. Smith countered with a demand that appropriations designated for automation of some other local weather service operations be diverted to pay the salaries of staff at the 18 stations whose closure had been recommended. The Reagan administration, she complained, had a policy of "dehumanization"—a novel boo-word for automation.

The Civil Servant Connection

The battle between Representative Smith and Commerce Secretary Baldrige points to the second facet of the legislative process that contributes to the immortality of administrative units and projects. Though a president and his appointees in the executive branch may push for spending cuts and greater efficiency, career civil servants in the executive branch rarely concur. And these same civil servants, through effective lobbying and the nourishment of longstanding relationships with legislative subcommittees, have clout. Nominally under the authority of appointed executives, these civil servants, through their liaisons with Congress, are able to resist executive authority. Their resistance becomes understandably acute when their own jobs are at stake.

The Grace Commission tells of the case of the Customs Service, when regional consolidation was proposed by agency executives. Congress soon passed an act requiring that six months' written notice be given if agency officials wanted to consolidate or close any offices. This requirement thwarted the effort, since it provided just enough time for those affected to organize a good lobbying campaign against it.

Under the Carter administration, seven overseas US consulates were closed when the Department of State said the posts were unwarranted. Some legislators, apparently pressed by career foreign service personnel, got the money restored in 1982 and the consulates reopened. The State Department figured that this cost the taxpayers $1 million—not counting the annual costs of operating the reopened posts.

Legislators sometimes override attempts by agencies to economize on staff by demanding that plans for retrenchment or reorganization be submitted to congressional subcommittees for review. Or they simply instruct agencies to maintain a certain staff level. For example, Rep. Gerry Studds of Massachusetts (D) succeeded in inserting language in the Coast Guard's 1982 authorization bill requiring the agency to maintain "at least 5,484 civilian employees" through 1983 and 1984. Presumably some constituents who had faced dismissal became politically indebted to Studds for his efforts in their behalf. Perhaps more significant, the congressman from Massachusetts could now tell local voters that he had saved x number of jobs in their locale.

In some cases, the liaison between Congress and career civil servants has led to congressional involvement in minute details of executive-branch management. The Government Printing Office (GPO) offers a case study. A Joint Committee on Printing (JCP), whose function is to oversee the Government Printing Office, consists of five representatives and five senators. Notes the Grace Commission's Report on Congressional Encroachment: "JCP has given itself veto authority over all editorial, marketing and pricing decisions of the agencies that involve printing."

The JCP overseers are consulted about equipment, size and quality of paper, design and format of publications, colors used, the appearance of all new government letterheads, manning, pay scales, virtually every aspect of operations. It is what the Grace Commission calls "micromanagement." In 1981, Danforth Sawyer, President Reagan's appointed chief of the GPO, wanted to close 23 of the GPO's bookstores, which together were losing $10 million a year. GPO employees promptly protested, and Sen. Charles Mathias (R–Md.) and Rep. Augustus Hawkins (D–Calif.) managed to get the JCP to rule out any "change in the status" of the bookstores. So the proposed economies went by the board.

The unions representing GPO staff persuaded the JCP to give them massive pay raises in the years 1970 to 1975. They got raises amounting to 65 percent over five years, compared to 30 percent for federal employees as a whole. Currently, GPO chief Sawyer estimates that GPO printers get $4 an hour above market wage rates.

It is not surprising, then, the General Accounting Office has found that government agency printing costs 16 times as much as getting the same work in the private sector. The GAO also found wide and unexplained variations in costs between different federal agency printing establishments—of which there are, in total, 300!

Under the Iron Triangle

A third factor contributes to Congress's spending habits. Local congressional considerations and the vested interests of civil servants often combine with the designs of powerful interest groups to prevent budget cuts. "Iron triangles" of congressional subcommittees, executive agency officials, and interest groups have continuously worked to keep federal budgets swollen.

Mining interests illustrate the problem. The National Defense Stockpile of strategic metals is supposed to be managed according to some assessment of the country's defense needs, but legislators pitch in to assert constituent interests. For example, Sen. James McClure (R) of Idaho, a silver-mining state, in 1981 managed to attach a rider to a defense bill preventing the government from selling any silver from the stockpile (which sale would presumably lower the market price of silver and make mining less profitable). The Congressional Budget Office estimated that the sale of surplus silver could bring in $1.04 billion but noted the fierce opposition that such sales would invite from mining interests.

Putting pressure from another direction, representatives of copper-mining states have introduced bills designed to force the government to buy 200,000 short tons of copper (worth $300 million) for the stockpile. The agency responsible for the stockpile objected that this proposal violates the letter of the Stock Piling Act, which specifically prohibits the use of the stockpiles to subsidize the producing industry.

An iron-triangle relationship has been equally zealous in protecting cotton harvesters. Rep. Jamie Whitten (D–Miss.) managed to add a $100-million subsidy for cotton harvesters to a 1983 supplemental appropriations bill. Whitten's status as long-time chairman of the Agricultural Appropriations Subcommittee makes him an obvious target of lobbying by cotton harvesters. That his state is one of the nation's important cotton producers gives Whitten a personal incentive to see that his subcommittee accommodates these lobbyists.

Champions of Waste

Occasionally, it is difficult to discern just what motivates legislators to rise to the defense of certain programs. In 1981 Sen. Robert Byrd (D–W.Va.), for example, saved Amtrak's passenger train service running three times a week between Washington, D.C., and Chicago. The train carries an average of only 142 riders at a cost to taxpayers of $6.7 million a year. Amtrak itself wanted to discontinue the service, because it was unattractive and grossly wasteful, the distance between Chicago and Washington, D.C., being much too long to attract anything other than tourist traffic.

But, the Grace report noted, the senator felt that "his constituents deserved the service provided by the train even though few of them apparently use it." Filled with such feelings, Byrd had an appropriations bill amended to read: "Notwithstanding any other provision of law, Amtrak shall provide through passenger rail service between Washington, D.C. and Chicago." Surely those 142 riders could not have cost Byrd reelection had he failed to preserve the train! Yet preserve the system he did—in the name of "deserving" constituents.

By any measure, the Washington-Chicago service would fail a cost-benefit analysis. But Congress requires no such analysis on a systematic basis.

Again and again, the Grace Commission found similar examples of spending generated by legislators protecting narrow interests. To onlookers, this spending might clearly seem to be nothing more than sheer waste, pure and simple.

So blatantly wasteful are many of the expenditures identified by the Grace Commission that some might think these costs are an awful mistake. Surely all we really need to do is expose them to public scrutiny in order for actions to be taken to eliminate them? In fact, every single example of "waste" that can be identified has a vested interest behind it, if not a number of interest groups, accounting for why the expenditure arose, why it was funded, and why it will be difficult to eliminate. Every piece of "waste" has its champions in the executive branch, the legislative branch, and outside government, as this brief accounting has suggested.

Nothing highlights this more clearly than congressional and interest-group response to the Grace Commission's findings. Typical was a lengthy critique by James Packard Love of the Center for Study of Responsive Law, inserted into a February 1984 congressional hearing on the Grace Commission recommendations. Love complained that "the report goes beyond management concerns to address important policy issues." Calling the report "deceitful" in claiming that its recommendations zero in on waste and inefficiency, Love charged that many proposals in fact amount to cutbacks in essential public programs.

President Reagan, too, came in for criticism. In supporting the Grace Commission, charged Love, he had "forsaken his opportunity to use the Presidency as a bully pulpit to enlighten the public about our fiscal problems and encourage all Americans to make sacrifices toward a more just and open society. Instead, he has allowed himself to become the puppet of bullies, bent on enriching the rich, despoiling our health and environment, and further impoverishing our poor."

Some members of Congress were equally critical. Representing the Grace Commission at hearings before the House Budget Committee, J.P. Bolduc discussed several cost-cutting proposals for the food stamp and school lunch programs. The proposals, he explained, were not intended to eliminate benefits from needy individuals but would save the taxpayers money by eliminating fraud and duplication of benefits, updating benefit assessments with 1981 demographic statistics rather than the currently used 1971 figures, and doing away with the smallest denomination of food-stamp coupon.

Rep. Geraldine Ferraro (D–N.Y.), now the Democratic vice-presidential candidate, attacked the proposals ferociously, charging that "99.6 percent of the survey's recommendations for savings in the food stamp program would result in lower benefits to the recipients." Never mind that 1981 statistics are more relevant than 1971—"Utilizing your updating," claimed Ferraro, "you are actually cutting benefits to 96 percent of the recipients." Added Ferraro, "I feel very, very strongly about this."

The stridency of these remarks illustrates the extent to which the Grace Commission hit upon sensitive political concerns. The commission itself was not blind to the problems of trying to implement its recommendations. It recognized in its summary Report to the President that government is subject to three influences "promoting inefficiency." Namely, within government (1) cost-inefficient management tends to be rewarded with higher appropriations and more staff; (2) government is insulated from competitive pressures and therefore is able to avoid proposals for change; and (3) "powerful constituencies exist within and outside government that can and do lobby effectively to prevent change, while taxpayers, all 90 million of them, remain moot [sic]." (I suppose they meant "mute," but impotent would have been a better word).

So-called waste is integral to the process of government. It is there because the groups who want these expenditures are politically stronger than those who don't. And if waste is to be reduced, as much thought needs to be given to the political mechanics of cutting government as to the identification of where waste exists.

The Mechanics of Cutting

Those political mechanics involve the structure of the executive branch, as well as the process of legislative decisionmaking. Government agencies are naturally expansionist. Their middle management in particular tends to gain in prestige and pay in proportion to agency staff and expenditures, not performance, because performance is always so difficult to measure.

Executive branch expansionist tendencies are coupled with a legislative process that encourages logrolling and heightens the impact of parochial and special interests. Legislative riders, in which items are added to bills even though they have no direct bearing on the main theme of the measure, are commonplace. It was through just such a device that Rep. Carl Perkins, for example, managed to keep funding for the Yatesville Dam alive.

In addition to the problem of legislative riders, subcommittees divide up consideration of the budget according to specific areas of jurisdiction, and there is little weighing of priorities among different issues. And the subcommittee structure itself invites the establishment of "iron triangle" coalitions.

What is to be done? To that question, I only have the sketchiest of suggestions here.

One approach worth more serious efforts is coalition-building and counter-lobbying by small-government, free-market groups. Fred Lee Smith, who made himself a national name last year in organizing the congressional coalition that defeated the Clinch River breeder reactor and nearly blocked extra funding of the International Monetary Fund (IMF), is the most active and articulate of these counterlobbyists. His recently formed Competitive Enterprise Institute in Washington, D.C., is a promising effort to roll back the logrollers.

Instituting a line-item veto power for the president might also reduce some of the atrocities against the public purse discussed in the Report on Congressional Encroachment. As it is now, the president must veto an entire bill or let the entire bill pass. For President Carter, for example, this would have meant nixing the entire $10.2-billion Public Works Appropriations Bill, with all its energy research and development expenditures, just to eliminate a handful of marginal water projects. However much free-market advocates might like to see the whole lot torpedoed, that is politically unrealistic. The line-item veto would at least afford the means of controlling limited budgetary areas.

A line-item veto power would, of course, be no utter panacea, since it would shift the venue of lobbying away from Capitol Hill to Pennsylvania Avenue. But there is some evidence that presidents can be more resistant to the logrollers because of their national, rather than local, constituencies.

The proposed balanced-budget and spending-growth amendments to the Constitution are other measures that may be helpful. Again, however, they will not provide a complete solution in themselves.

In the end, a more-aware public is a key to inhibiting politicians' favor-mongering. If members of Congress know they may pay a price next election, they will be more likely to curb their spending habits.

To this end, the work of J. Peter Grace and J.P. Bolduc, chief operating officer of the Grace Commission, goes on. A $5-million educational campaign has been launched, involving 500 public speakers, a TV documentary, videotapes, two books (War on Waste and Burning Money), and one-page flyers for insertion in employee pay and shareholder dividend envelopes.

They have also gotten the ball rolling at the grass roots with a new organization called Citizens Watch on Waste. Early activity, championed by syndicated columnist Jack Anderson, includes a nationwide drive to obtain taxpayers' signatures on an antispending petition.

But the ultimate sanction is for voters to stop electing representatives who dole out favors. "Nobody has ever been elected for saving the taxpayers money. It's just the opposite," notes Grace. And commissions and petitions can't change that. Only the voters can.

Contributing Editor Peter Samuel is a Washington-based journalist. Before he came to America, he was a recipient of the Adam Smith Prize in Australia for his reporting there.