16 MAY 1981, Page 8

The axe that doesn't cut

Tom Bethell

Washington Last week the House of Representatives voted by a wide margin (253 to 176) to cut Federal spending by 42 billion dollars in fiscal year 1982 (which begins on 1 October). The newspapers have been filled with headlines and editorials saying what a triumph this was for President Reagan. In many ways I suppose it was. Sixty-three Democratic Congressmen broke ranks to vote with the Republicans. In recent years it has been impossible to implement any kind of a cut in the Federal Budget. Moreover, budgetary changes in the Seventies were nearly always expansions of welfare and social services at the expense of defence spending. This year's budget 'cut' reverses that trend.

The only problem is that it was really not a budget cut at all, as the quotation marks above may have hinted. When the government publishes its budget for the coming fiscal year (it does this in January), it simultaneously publishes figures for the next five years. After a good deal of telephoning around Washington, I have been unable to find out why this imprudent practice was initiated, or who was responsible. It is, however, of recent origin, and is apparently modelled on the Soviet Union's five-year targets. The problem with such long-range forecasting is that it gives cautious legislators a good excuse to vote against tax cuts on the grounds that revenues in 1986 might fall short of the target. In effect, this turns out to be a disguised form of economic planning.

• But these 'out-year figures', as they are called, do allow us to go back to the middle of Jimmy Carter's term and find out what federal spending in fiscal '82 was then estimated to be. Hey presto, we find that in January 1979 the aggregate spending figure for '82 was: 615 billion dollars. A year later this figure was 686 billion dollars. It had risen because the higher inflation rate in 1979, and higher unemployment rate, had automatically increased `entitlement' payments to the recipient classes. (Such transfer payments are adjusted upwards by civil servants without any additional legislation.) What, then, is the new, much ballyhooed figure — the tattered budgetary remnant after last week's 'historic' cut? Answer: 688.8 billion dollars — a couple of billion higher than it was going to be a year ago. (Inflation has subsided in the interim, too.) How can this possibly be described as a cut? Only by comparing it with Jimmy Carter's last-minute, lame-duck, big spender's wish list, promulgated shortly before he left office and referred to now as 'current policy'. That monster was over 730 billion dollars.

So that's how the budget has been cut. It's as though your wife were to go out of the door threatening to impoverish you on a shopping spree, and then return laden down with packages, but nevertheless bearing the good news that she had just 'saved' you a lot of money by being slightly less extravagant than she originally intended.

Many additional shoals and hazards lie ahead for the Reagan budget. The aggregate spending figure, 688 billion dollars, is really only a collective promise by Congressmen that they will be on their best behaviour in the coming months and won't appropriate monies in excess of that amount. But the problem is that they will now all retire to their numerous respective committees where they will appropriate sums for their pet causes, projects and constituents. Then, towards the end of the summer, someone will go around and tot up all the separate committee totals, only to find, as certainly will happen, that the sum of all the component budgetary parts is more than 688 billion dollars.

At that point there is supposed to be something terribly stern and disciplined called the 'reconciliation process', whereby the various committee chairmen apologise for their excessive zeal and scale down their appropriation requests to the point where the new aggregate figure is no higher than the ceiling set last week. In practice, however, committee chairmen in recent years have refused to back down, knowing full well that the ceiling is flexible (i.e. non-existent). Additional votes after the fiscal year is already underway legitimise the whole thing, and no one pays any notice because by then the fiscal '83 budget has been published and the news media are preoccupied with that. The Federal budget, therefore, has turned out to be nearly uncontrollable. In short the 'budget process', which I have just described, does not work. It was introduced in 1974 supposedly to increase 'control' of outlays, and so on. In reality the ramshackle machinery was set up to seize power away from the Nixon White House. It is time for the Reagan White House to seize it back.

There are other and more general reasons why it is difficult for a legislature to cut spending when its members are as independent of one another as are US Congressmen. In the first place, quite simply, it's fun to spend other people's money. Perhaps this puts the matter too bluntly. But an antidote is needed. As government spending has become more and more a matter of taking money away from some people and transferring it to others, so it has become increasingly shrouded in moral righteousness. Income transfers, even if they dull the incentives of both donors and recipients, nevertheless greatly uplift the legislator, who places the crown of compassion on his own head.

On the other hand, those who want to reduce or eliminate at least some of this coerced redistribution — call it compulsion, not compassion — are likely to be impugned as 'advocates of the rich', 'ultraconservatives,' and so on. Those who want to get government spending under control, and they are admittedly numerous, will first have to get political rhetoric under control.

Income redistribution, obviously, creates grateful recipients. As the budget director, David Stockman, pointed out some years ago in an article he wrote while he was a staff assistant to Representative John Anderson, legislators can win votes and friends by taking away a penny from everyone and handing out a dollar to a select few. Stockman called this the 'social pork barrel'. The few will be duly grateful and will remember their Representative on election day. The rest won't miss the penny. To realise how inexorably ratchet-like this process becomes, imagine trying to reverse it — taking back the dollar and restoring the pennies. Multiply this mechanism across the hundreds of special interest groups that have built up over 50 years — all trying to qualify for their own share of handouts — and you can appreciate the current momentum of Federal spending. A legislator arriving in Washington who wants to resist this will have to be singularly vigilant, thick-skinned, and willing to put the nation's good ahead of the interested parties who will surely come by his office with a high-class begging act. These groups will be quick to point out that many of their members live in his District. It's so much easier to say yes than no under these circumstances.

What about all the new conservatives who have been elected, you may reply? Isn't the country 'moving to the right,' after all? To begin with, legislators who arrive in Washington totally set against the existing order and determined to vote against it at every opportunity are immediately subjected to a barrage of subtle opprobrium from just about every organ of the local press; a relentless succession of nicks and cuts, tiny sarcasms, disdainful asides: 'slot' plistic . . thinks he can turn the clock back . . . lacks compassion . . . if only he had a sense of humour. . . '. After a while — that is, within two years in most cases, occasionally four — this begins to take its toll. Battle fatigue, and a desire to be loved, undermine all but the staunchest resolve. But a simple remedy is always at hand. The legislator who mends his ways and begins to vote for everyone's favourite spending programmes suddenly finds that he has a hundred friends. Hitherto uncle' tected virtues will be publicly discussed. Reporters from the Washington Post will pay homage with feature stories about the new convert to the reigning order of progressivism. A distinct genre of Washington journalism takes over here, the strange new respect story. The following lines, suitably amended, will occur somewhere in it: "'You know," the old Washington hand said, "When Jackson first came to this town he was, frankly, a hick. But he has grown. He has become open and sensitive to new ideas. I look at him with a strange new respect . .

After that there's no limit to the social horizons: the convert is invited in from the suburbs, given a key to the city, perhaps invited to dinner by the Harrimans, even touch football on Hickory Hill. It's hard to resist. This is especially so because the conservative who starts to vote for the big income transfer programmes will find that he meets with no opposition in his home state: the grass-roots organisations will get after him if he votes for transferring the Panama Canal, or for gun control But not if he votes for the big welfare package or the Education Bill.

In short there are no political costs for voting with the liberals on most issues (admittedly some are dangerous: abortion funding, for example); but there are great social costs for voting too conservatively. So almost no one does. It is rarely pointed out that the large income transfer programmes pass by huge margins and are not even used as 'key votes' by liberal or conservative organisations (such as Americans for Democratic Action or Americans for Constitutional Action) to determine the legislator's position in the political spectrum. If they were, the overwhelmingly liberal nature of both House and Senate would become clear.

Very few conservatives have resisted this combination of social shepherding and political pressure in recent years. One who did was former Senator James Buckley of New York, the brother of William F. Buckley and now Under-Secretary of State for Security Assistance. Buckley, of course, arrived in Washington already equipped with the requisite social confidence. That's exactly what many conservatives don't have. Most of them are from small towns in distant parts, and they tend to be secretly awed by the chandeliers of Georgetown.

Since the large income-transfer programmes apparently are immune, but small projects just might be voted down by legislators willing to show their toughmindedness every now and then, staff directors and committee chairmen see to it that the latter are clustered with the former, so that all may sail together in protective convoy past the hazards of the gavel. In isolation, the Ozarks Regional Commission might be torpedoed: but attached as a rider to the Social Security Bill, it would certainly be safe for another year. Another obstacle to the budget cutter's axe was recently discussed in an interesting newspaper report on the Appalachian Regional Commission and the Economic De velopment Administration. 'Richard M. Nixon tried to get rid of both programmes almost a decade ago and failed miserably,' it was reported in the Washington Post. 'He found that despite the low profiles of the two agencies and their all-but-forgotten mandates, both have very powerful friends. The reason: both dispense a great deal of pork — not just to the poor but to states, local governments and businesses.'

Senator Jennings Randolph of West Virginia, the author of the 1965 legislation that created both agencies, was then quoted as saying: 'I can't believe President Reagan will take the advice of this "sock 'em" fellow. This is a meat-axe approach. It ignores everything we've accomplished. I will support reasonable cuts. But this is unrealistic and unreasonable.'

Pride of authorship shows up here. After living in Washington for a while legislators often find that their names are followed by the words, 'the powerful . . . ', and after a bit they find it hard to entertain the idea that the country could, in fact, get along perfectly well without them. They are therefore eager to prevent the idea from being put to the test. People who have spent a good portion of their lives voting to take money away from some people and hand it over to others are obviously eager to believe that the funds, and therefore their lives, have been well spent. A genuine spending reduction would carry with it the risk of showing us all that the country was actually better off without so much compulsory compassion.

For all these reasons, then, I do not believe it is possible to cut spending in anything other than an illusory way at present, even though an actual majority of the citizenry may want a real cut. A brief look at recent history shows how rare Federal spending reductions have been. The complete list of cuts for the past 50 years is a short one. In 1938, total Federal spending was somehow reduced to 6.8 billion dollars from 8.4 billion dollars. The New Dealers are often accused of being big spenders, but they were tightfisted fiscal conservatives compared with today's profligates on Capitol Hill.

Next, there were big spending reductions after World War Two. It is impossible to look at the post-war budget figures without a feeling of admiration for the Federal establishment as it was then constituted. Government, surely, must have been a more honourable enterprise in those days.

Today a hundred excuses would be put forward to maintain spending at the former, wartime level. Here are the nostalgic numbers: 1945 — 93 billion dollars; 1946 — 55 billion dollars; 1947 — 34 billion dollars; 1948 — 30 billion dollars. In the same years the country moved from a 47 billion dollars deficit to a 12 billion dollars surplus.

Since then there have been two years in which spending was reduced: 1954 and 1955 (again, as a result of post-Korean war military reductions.) And that's it. No post-Vietnam reductions. We have had a bad case of galloping consumption ever since.

The Reagan Administration's own press releases in February misleadingly asserted that the 'leading edge' of its economic programme was to be 'the comprehensive reduction in the rapid growth of federal spending'. Note the careful wording. In fact the success or failure of Reagan's economic plans will depend not at all on minor changes in spending growth rates. It will, on the other hand, depend crucially on Congress approving his tax rate reductions in the coming weeks. If tax rates are cut, the economy will grow up and around the obstacles of Federal spending. If they are not, or insufficiently, then Mr Reagan may feel like boarding Air Force One to commiserate with Margaret Thatcher.