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A M E R I C A ’S N E W B E G I N N I N G :

A P R O G R A M
F O R
E C O N O M I C
R E C O V E R Y
F E B R U A R Y 18, 198 1




NOTICE
Embargoed-for Wire Transmission Until
4:00 p.m. (E.S.T.)
and Embargoed for Release Until
9:00 p.m. (E.S.T.)
Wednesday, February 18,1981
The W
hite House
Office of the Press Secretory




America’s New Beginning :
A Program for Economic Recovery

C o n te n ts

I.

II.

P r e s id e n tia l M e s s a g e t o th e C o n g r e s s

A W h ite H o u s e R e p o r t

III.

P r e s id e n t’ s B u d g e t R e f o r m P la n

IV .

P r e s id e n t’ s P r o p o s a ls fo r T a x R e d u c t io n










I.

P r e s id e n tia l M e s s a g e to th e C o n g r e s s




THE

W H IT E

H OUSE

W A S H IN G T O N

F ebru ary

TO

THE

CONGRESS

I t I s w ith
e v e n in g t o m ake
ad d ress b r ie fly
am p r o p o s i n g I n
fo r ou r econom y.
in n u m ber:

OF

THE

U N IT E D

18,

1981

STATES:

p le a s u r e th a t I ta k e th e o p p o r tu n ity t h is
my f i r s t m a j o r a d d r e s s t o t h e C o n g r e s s .
The
d e s c r i b e s th e c o m p r e h e n s iv e p a c k a g e t h a t I
o r d e r t o a c h ie v e a f u l l and v ig o r o u s r e c o v e r y
T he k e y e le m e n ts o f t h a t p a c k a g e a r e fo u r

A b u d g e t r e fo r m p la n
F e d e r a l s p e n d in g ;

to

cut

th e

ra te

o f

g ro w th

in

A s e r i e s o f p r o p o s a l s t o r e d u c e p e r s o n a l in c o m e
ta x r a te s by 10 p e rc e n t a y e a r o v e r th r e e y e a rs
and
fo r
A

to c r e a te jo b s by a c c e le r a t in g d e p r e c ia tio n
b u s in e s s in v e s t m e n t in p la n t and e q u ip m e n t;

fa r -r e a c h in g

p rogram

o f

r e g u la to r y

r e lie f;

A n d , in c o o p e r a t io n w ith th e F e d e r a l R e se r v e B o a r d ,
a n ew c o m m itm e n t t o a m o n e t a r y p o l i c y t h a t w i l l
r e s t o r e a s t a b le c u rre n c y and h e a lth y f in a n c i a l
m a rk ets.
Taken t o g e t h e r ,
I b e lie v e th e s e p r o p o s a ls w i l l p u t th e
N a tio n on a fu n d a m e n ta lly d i f f e r e n t c o u r s e —
a c o u r se le a d in g
to
o f

le s s
in fla tio n ,
our c itiz e n s .
To

a id

th e

m ore

C on gress

g ro w th ,

in

and

a c tin g

a

b r ig h te r

p r o m p tly

on

fu tu re

th e se

fo r

a ll

p r o p o s a ls ,

I am t o d a y f o r w a r d i n g t h e a t t a c h e d d o c u m e n t s w h i c h d e s c r i b e
t h e p r o g r a m i n g r e a t e r d e t a i l t h a n I c a n i n my a d d r e s s t o
you.
S p e c i f i c a l l y , y o u w i l l f i n d th e f o l l o w i n g d o c u m e n ts
in t h i s p a c k a g e :
(1 )
An e c o n o m ic r e p o r t —
is s u e d a s a W h ite H ou se
paper —
t h a t o u t l i n e s a l l f o u r o f t h e e l e m e n t s i n my
p rogram and s e t s f o r t h th e b a ck g ro u n d to th o s e e le m e n ts .

th a t

(2 )
has

A le n g th y r e p o r t on
been p rep a red by th e

my i n i t i a l b u d g e t c u t p r o p o s a l s
O f f i c e o f M anagem ent and B u d g e t.

I t s h o u ld b e n o te d t h a t t h i s r e p o r t w i l l b e fo llo w e d b y a
c o m p le te b u d g e t s u b m is s io n t o th e C o n g r e s s , a d d r e s s in g f i s c a l
y e a r s 8 1 and 8 2 .
T h a t r e p o r t w i l l b e s e n t t o you on
M arch 1 0 t h .




2
(3 )
by

th e

A

D e p a rtm e n t

report
o f

th e

on

my

p r o p o s a ls

fo r

ta x

r e d u c tio n

is s u e d

T reasu ry.

I t i s my h o p e t h a t t h i s c o m b i n a t i o n o f
a llo w
th e C o n g r e s s t o p r o c e e d in a c c o r d a n c e
e s ta b lis h e d
in t h e C o n g r e s s i o n a l B u d g e t A c t
r a p id c o n s id e r a tio n o f t h is e n t ir e p ro gra m .

tr a n s m itta ls w ill
w ith t im e t a b le s
and w i l l p e r m it

My C a b i n e t a n d o t h e r m e m b e r s o f my A d m i n i s t r a t i o n h a v e
w o r k e d i n t e n s i v e l y a n d c o o p e r a t i v e l y w i t h me i n d e v e l o p i n g
t h i s p r o g r a m f o r e c o n o m ic r e c o v e r y .
A l l o f u s a r e now e a g e r
t o w ork w it h t h e C o n g r e s s a s p a r t n e r s in an u n d e r t a k in g t h a t
i s v i t a l t o th e fu t u r e o f th e N a tio n .




RONALD

REAGAN




II.

A W h ite H o u s e R e p o r t




CONTENTS

I.

II.

A P ro g ra m fo r E c o n o m ic R e c o v e r y

T h e T w in P r o b le m s o f H ig h I n fla tio n a n d S ta g n a n t G r o w t h

III.

S lo w in g th e G r o w t h o f G o v e r n m e n t S p e n d in g

IV .

R e d u c in g T a x B u rd e n s

v.
V I.

V II.




P r o v id in g R e g u la t o r y R e lie f

C o n tr o llin g M o n e y a n d C r e d it

A N ew

B e g in n in g fo r th e E c o n o m y




I. A Program for Econom Recovery
ic
T o d a y the Adm inistration is proposing a national recovery plan to reverse the debilitating
com bination o f sustained inflation and econom ic distress which continues to face the Am erican
econom y.

W ere we to stay with existing policies, the results w ould b e readily predictable:

governm ent

presence

unem ploym ent.

in

the

econom y,

m ore

inflation,

stagnating

productivity,

a rising

and

higher

Indeed, there is reason to fear that i f we remain on this course, our econom y may

suffer even more calam itously.

T h e program w e have developed will break that cycle o f negative expectations.

It w ill revitalize

econ om ic growth, renew optim ism and confidence, and rekindle the N atio n ’s entrepreneurial instincts
and creativity.

T h e benefits to the average Am erican will be striking. Inflation — w hich is now at d ouble digit
rates —

will be cut in h a lf b y 1986.

T h e Am erican econom y w ill prod u ce 13 m illion new jobs by

1986, nearly 3 m illion m ore than i f the status qu o in governm ent p olicy were to prevail.

T he

econ om y itself should break out o f its anemic grow th patterns to a m u ch m ore robust grow th trend o f
4 to 5 percent a year.

T hese positive results w ill be accom plished sim ultaneously with reducing tax

burdens, increasing private saving, and raising the living standard o f the Am erican fam ily.

T h e plan is based on sound expenditure, tax, regulatory, an d m onetary policies.

It seeks

prop erly functioning m arkets, free play o f wages and prices, red u ced governm ent spending and
borrow ing, a stable and reliable monetary fram ework, and reduced governm ent barriers to risk-taking
and enterprise.

T h is agenda for the future recognizes that sensible policies which are consistendy

applied can release the strength o f the private sector, im prove econom ic growth, and reduce inflation.

W e have forgotten som e important lessons in Am erica.
inflation.

Excessively

rapid

monetary

grow th

cannot

lower

govern m ent regulations d o not contribute to econom ic vitality.

H igh taxes are not the rem edy for
interest rates.

W ell-intentioned

In fact, governm ent spending has

becom e so extensive that it contributes to the econom ic problem s it w as designed to cure.

M ore

govern m ent intervention in the econom y cannot possibly be a solution to ou r econom ic problem s.

W e must rem em ber a sim ple truth. T he creativity and am bition o f the Am erican p eo p le are the
vital forces o f econom ic growth. The m otivation and incentive o f o u r p eo p le — to supply new goods
and services and earn additional income for their fam ilies — are the m ost precious resources o f our
N atio n ’s econom y.

T h e goal o f this Adm inistration is to nurture the strength and vitality o f the

A m erican people b y reducing the burdensom e, intrusive role o f the F ed era l G overnm ent; b y lowering
tax rates and cutting spending; and by providing incentives for ind ivid u als to work, to save, and to
in v e st

It is our basic b e lie f that only by reducing the grow th o f governm ent can we increase the

grow th o f the econom y.

T h e U .S. econom y faces no insurm ountable barriers to sustained growth.

It confronts no

perm anently disabling tradeoffs between inflation and unem ploym ent, betw een high interest rates and
high taxes, or betw een recession and hyperinflation.




W e can revive the incentives to w o rk and save.

W e can restore the willingness to invest in the private capital required to acjhieve a steadily rising
standard o f living. M ost important, we can regain our faith in the future.

T he plan consists o f four parts:

(1) a substantial reduction in the growth o f Federal

expenditures; (2) a significant reduction in Federal tax rates;
burdens;

(3) prudent relief o f Federal regulatory

and (4) a m onetary policy on the part o f the independent Federal Reserve System which is

consistent with

those

policies.

These

four

com plem entary

policies

fon n

an

integrated

and

com prehensive program .

It should b e clear from the most cursory exam ination o f the econom ic program o f this
Adm inistration that w e have m oved from m erely talking abou t the econom ic difficulties facing the
A m erican people to taking the strong action necessary to turn the econom y around.

T he leading edge o f our program is the com prehensive reduction in the rapid grow th o f Federal
spending.

As show n in detail below , our b udget restraint is m ore than "cosm etic" changes in the

estim ates o f Federal expenditures.
b u d g et reductions.

But we have not adopted a sim ple-m inded "m eat ax" approach to

Rather, a careful set o f guidelines has been used to identify lower-priority

program s in virtually every departm ent and agency that can be elim inated, reduced, or postponed.

The second elem ent o f the program, w hich is equally im portant and urgent, is the reduction in
F ed eral personal incom e tax rates b y 10 percent a year for 3 years in a row. G o s e ly related to this is
an incentive to greater investm ent in production and jo b creation via faster tax w rite-offs o f new
factories and production eq u ip m en t

The third key elem ent o f our econom ic expansion program is an am bitious reform o f
regulations
em p lo ym en t

that

w ill

reduce

the governm ent-im posed

barriers

to

investm ent,

production,

and

W e have suspended for 2 m onths the unprecedented flood o f last-minute rulem aking

o n the part o f the previous Adm inistration. W e have elim inated the ineffective and counterproductive
w age and price standards o f the C oun cil on W age and Price Stability, and we have taken other steps
to elim inate governm ent interference in the marketplace.

T he fourth aspect o f this com prehensive economic program is a m onetary policy to provide the
financial environm ent consistent with a steady return to sustained growth and price stability.

D uring

th e first week o f this Adm inistration its com m itm ent to the historic independence o f the Federal
R eserve System w as underscored.

It is clear, o f course, that m onetary an d fiscal policy are closely

interrelated. Success in one area can be m ade m ore difficult — or can be reinforced — b y the other.
T h u s, a predictable and steady grow th in the m oney supply at more m odest levels than often
experienced in the past w ill be a vital contribution to the achievem ent o f the econom ic goals
d escribed in this R eport. T h e planned reduction and subsequent elim ination o f F ed eral deficit
financing will h elp the Federal Reserve System perform its im portant role in achieving econom ic
grow th and stability.

T h e ultim ate im portance o f this program for sustained econom ic grow th will arise not only from
th e positive effects o f the individual com ponents, im portant as they are.

Rather, it w ill b e the

dram atic im provem ent in the underlying econ om ic environm ent and outlook that will set a new and




2

m ore positive direction to econom ic decisions throughout th e economy.
and high tax burdens w ill no longer be an overriding m otivation.

Protection against inflation

O n ce again econom ic choices —

involving working, saving, and investm ent — will be based primarily on the prospect for real rewards
for those productive activities which im prove the true econ om ic w ell-being o f our citizens.




3

II. The Tw Problem of High Inflation
in
s
and Stagnant G th
row
T h e policies this Adm inistration is putting forw ard for urgent consideration b y the Congress are
based o n the fact that this N ation now faces its m ost serious set o f econom ic problems since the
1930s.

Inflation has grown from 1 to 1 -1/ 2 percent a year in the early 1960s to about 13 percent in

the past 2 years; not since W orld W a r I have we had 2 years o f b ack -to -b a ck double digit inflation.
A t the sam e time, the rate o f econom ic growth has b een slowing and the unem ploym ent rate creeping
upward.

Productivity growth —

the m ost im portant single measure o f o u r ability to im prove our

standard o f living — has been declining steadily for m ore than a decade!

In the past 3 years our

productivity actually fell.

T h e m ost im portant cause o f our economic problem s has been the governm ent itself.
Federal

G overnm ent, through tax,

lon g-term

spending, regulatory,

and m onetary

growth and price stability for ephem eral short-term goals.

The

policies, has sacrificed
In particular, excessive

governm ent spending and overly accommodative m onetary policies h ave com bined to give us a
climate o f continuing-inflation.

T h a t inflation itse lf has helped to sap ou r prospects for growth.

In

addition, the grow ing w eight o f haphazard and inefficient regulation has weakened our productivity
growth.

High m arginal tax rates on business and individuals discourage work, innovation, and the

investm ent necessary to im prove productivity and lon g-ru n growth.

F in ally, the resulting stagnant

growth contributes further to inflation in a vicious cycle that can only b e broken with a plan that
attacks broadly on all fronts.

T h e R o l e o f t h e G o v e r n m e n t in C a u s i n g I n f l a t i o n

Surges o f inflation are not unusual in history; there were price explosions after b oth W orld
Wars, as w ell as sm aller outbursts in the 1920s and late 1930s. Therefore, in spite o f the role played
by food and energy prices in recent inflationary outbursts, it is m isleading to concentrate on these
transitory factors as fundam ental causes o f the inflationary bias in the A m erican econom y.

Even

when prices in these m arkets have been stable, inflation has continued w ith little relief.

W h a t is unusual about ou r recent history is the persistence o f inflation.

Outbursts o f high

inflation in the last 15 years have not been follow ed b y the custom ary price stability, but rather by
long period s o f continued high inflation.
our econ om y works.

This persistence o f inflation has crucially affected the way

People now believe inflation is "h ere to stay” ; they plan accordingly, thereby

giving further m om entum to inflation.

Since there are im portant long-term relationships betw een

suppliers and custom ers and betw een workers an d m anagem ent, lon g-term contracts, som etim es
unwritten, are often based on the view that inflation w ill p ersist T his robs the econom y o f flexibility
which m igh t otherwise contribute to reducing inflation.

T h e Federal G overnm en t has greatly contributed to the persistence o f high inflation.

O verly

stim ulative fiscal an d m onetary policies, on average, have financed excessive spending and thus
pushed prices upw ard. Since governm ent accom m odation is w idely exp ected to continue, inflation has
becom e em b ed d ed in the econom y.




4

W h en inflationary outbursts occur, policym akers all too often h ave made a quick turn toward
restraint. Such turnabouts, how ever, have been short-lived and their tem porary nature has increasingly
been anticipated by savers, investors, and workers.

Subsequent declines in em ploym ent and growth

inevitably call forth stim ulative policies before inflation can be brought under control.

Such

"sto p -a n d -g o " policies have on ly resulted in high er unem ploym ent and low er real growth.

F inally, but equally im portant, governm ent policies have increased inflation by reducing the
potential o f our econom y to grow — directly through the increasing burdens o f taxes and regulations,
and indirectly through inflation itself. The result is a vicious circle. Its force can b e m easured b y the
statistics o f our productivity slow dow n, but it is seen m ore dram atically in the anxiety and concern o f
our people.

G o v e r n m e n t C o n tr ib u t e s to th e P r o d u c tiv ity S lo w d o w n

Productivity, popularly m easured as ou tpu t per w orker-hour, is an indicator o f the efficien cy o f
the econ om y and consequently o f our ability to m aintain the rate o f im provem ent in ou r standard o f
living.

O v er the past 15 years, the rate o f productivity im provem ent has slowed, and now virtually

halted.
G overn m en t policies have been a m ajor contributor to the slow dow n but they can be an even
more im portant contributor to the cure. T h e w eight o f regulation and the discouragem ent that results
from h igh marginal tax burdens are key factors, but inflation itse lf also plays an im portant role.
R educed capital form ation is the m ost im portant and visible, but not the only, channel b y w hich this
occurs.




R a te s o f G row th in th e C a p ita l-L a b o r R atio, P rod u ctivity,
a n d R ea l N e t C a p ita l S to c k

P e r c e n t An nuo l R o t e

6
4

2
0
-2

Capital-Labor Ratio

Productivity

Net Capital Stock

Note: Capital-labor ratio is real net capital stock (gross stock less replacement
requirements and pollution abatement expenditures) in the p-ivate business
sector divided by employment.
Productivity is output per hour of all persons in the private business sector.
Source: Departments of Commerce and Labor and Council of Economic Advisers.

5

B y increasing uncertainty about the future, inflation discourages investors from undertaking
projects that they w ould have considered profitable but w hich, with today’s inflationary environment,
they consider too risky.

Inflation also diverts funds from productive investments into hedging and

speculation.
Although recent statistics show that the share o f ou r econom y’s production

devoted to

investm ent is high by historic standards, the magnitude is illusory — an illusion fostered b y inflation.
A ccelerating prices, and the high interest rates and shifting econom ic p o licy associated with them,
have contributed to an unwillingness to m ake lon g-lived investments.

A s a result, o u r stock o f

productive plant and equipm en t depreciates faster, so that m ore investm ent is needed sim ply to stand
still.
T h e regulatory requirem ents im posed b y the governm ent have likew ise served to discourage
investm ent by causing uncertainty in business decisionmaking.

In addition, investm ents to m eet

regulatory requirements h ave diverted capital from expanding productive capacity.

S om e estimates

have p u t regulation-related investment at m ore than 10 percent o f the total level o f business
investm ent in recent years. T h e expanding intrusiveness o f the governm ent into the private sector also
inhibits innovation and lim its the ability o f entrepreneurs to produce in the m ost efficient way.

I n fla t io n , G r o w th , a n d th e T a x S y s t e m
T h e role o f the tax system in reducing our past grow th, and its potential for im proving the
prospects for future grow th, deserve special attention.

B y reducing the incentives for investm ent and

innovation, both b y individuals and b y businesses, the tax system has been a k ey cause o f our
stagnation. Restoring the prop er incentives w ill m ake a m ajor contribution to the lo n g-ru n vitality o f
our econom y.
T h e progressivity o f the personal incom e tax system levies rising tax rates on additions to
incom e that m erely keep pace with inflation.

H ouseholds therefore fin d that even i f their gross

incom es rise with inflation, their after-tax real income declines.

Som e households respond to these

high er m arginal tax burden s b y reducing their work e ffo r t "Bracket creep" also encourages taxpayers
to seek out "tax shelters,” sources o f incom e that offer high er after-tax returns but n ot necessarily
higher -before-tax returns than more productive sources, again contributing to econom ic inefficiency.
In the last two decades the Congress has reduced personal incom e taxes seven times.

Nevertheless,

avera g e effective ta x rates a r e now about 3 0 p ercen t h igher than their m id -1960's low .

(S ee C h a rt)

M arginal tax rates have clim b ed in tandem w ith average rates.




6

E ffe c tiv e F e d e r a l P e r s o n a l
Percent

In c o m e T a x R a te s

Note Federal personal taxes as a percent of taxable income
Source: Department of Commerce and C o uncil of Economic A d v ise rs

D ue to inflation, the rate o f return on corporate assets, after tax, and the lev el o f corporate
earnings have been seriously eroded o v er the past decade a n d a half. T h a t was a m ajor factor stunting




R a t e s o f R e tu rn o n C a p ita l
Percent

Note: Rates of return on net stocks oI reproducible capital lor nan-fmanctal corporations
Source Departments of Commerce and Treasury

7

capital spending from what it otherwise would have b een.

T he tax treatm ent o f depreciation has

been an im portant contributor to this lowering o f returns.

W e now allow w rite-offs at the cost o f

purchase, rather than at more realistic prices. This creates phantom profits upon which taxes are paid.
Finally, unless the Congress takes frequent actions to offset the revenue-generating effect o f
inflation on the progressive personal tax system, the C on gress has available for spending unlegislated
increases in funds. Inflation in tandem with the tax system thereby impairs the fiscal discipline o f the
budget process an d facilitates high er levels o f governm ent spending than w ou ld result i f the Congress
were forced to vote on each tax increase. This offers further encouragem ent to inflation.

T h e E c o n o m y a s a W h o l e h a s S u ffe r e d

Because past policies have not reduced unem ploym ent, even as they have encouraged rising
inflation — the econom y as a w hole has suffered.

O v e r the past two decades, we have seen the

"misery index” — the sum o f the inflation and unem ploym ent rates — m ore than double, rising from
7.3 in 1960 to 17.2 in 1980. W h ile unem ploym ent rates have fluctuated over the business cycle, there
has been no lon g-ru n trad eoff betw een unem ploym ent and inflation.

T h e upw ard m ovem ents in

inflation -have n ot brought us falling unem ploym ent rates, nor has high u nem ploym ent brought low er
inflation.




M isery In dex
(U n e m p lo y m e n t R a te P lu s Inflation)
Percent

i8 —
|
-----------------------------------------------------------------------------16
14

1
2
1
0
8
6

2
0
1960

62

64

66

68

70

72

74

76

78

80

Unemployment Rate
□

Percent Change m the Personal Consumption Expenditures Deflator
Source: B aw d on date from Departments of Commerce and Labor

8

T h u s, trends o f the past are clearly disturbing in that they have sapped our N ation’s econom ic
vitality.

O f greater significance, how ever, is the danger we face i f the policies o f the 1970s are

continued.
F o r the first time in A m erican history financial m arkets reflect the b e lie f that inflation w ill not
retreat significantly from current high levels.

T he N atio n ’s econom y an d financial system are on a

dangerous course — one which, i f n ot reversed, w ould lead to a prolon ged stagnation o f econom ic
growth an d em ploym ent, ever higher inflation and interest rates, and potentially a financial crisis.
The solution to this grow ing econom ic threat calls for b o ld actions designed to reduce — dram atically
and sharply —

inflationary expectations.

T hese policies must restore fiscal integrity;

increase

incentives for saving, investm ent, and production; attain m onetary and financial stability; and enhance
the role o f the m arketplace as the principal force in the allocation o f resources.




9

III. Slow the G th of Governm Spending
ing
row
ent
The uncontrolled growth o f governm ent spending has been a prim ary cause o f the sustained
high rate o f inflation experienced b y the American econom y.

Perhaps o f greater importance, the

continued and apparently inexorable expansion o f governm ent has contributed to the widespread
expectation o f persisting — and possibly higher — rates o f inflation in the future.
Thus, a central goal o f the econom ic program is to reduce the rate at which governm ent
spending increases.

In view o f the seriousness o f the inflationary pressures facing us, the proposed

reductions in the Federal budget for the com ing fiscal year are the largest ever proposed.
Despite the tendency to refer to "cutting" the budget, it is d ear that an expanding population, a
growing econom y, and a difficult international environm ent all lead to the n eed for year-to-year rises
in the level o f governm ent spending.

Thus, the badly n eed ed effort to "c u t" the budget really refers

to reductions in the amount o f increase in spending requested from one year to the next.
The m agnitude o f the fiscal problem facing the U n ited States can b e seen when we realize that,
despite the $49.1 billion o f savings including $5.7 b illion in o ff-b u d ge t outlays that is being
recommended for fiscal 1982, the total am ount o f Federal outlays for the year is likely to be $41
billion higher than the current year.

(A separate docum en t is being issued by the O ffice o f

Management a n d Budget that outlines the major spending reductions in considerable detail.)
It is essential to stress the fundam ental principles th at guided the developm ent o f that program.
First, and m ost importantly, all m em bers o f our society except the truly needy will be asked to
contribute to the program for spending control.
Second, w e will strengthen our national defense.
Finally, these fundam ental principles led to n ine specific guidelines that were applied in
reducing the budget:
•

Preserve "the social safety net."

•

Revise entitlements to eliminate unintended benefits.

•

R edu ce subsidies to m id d le - and u pp er-in com e groups.

•

Impose fiscal restraint on other national interest programs.

•

R ecover costs that can be clearly allocated to users.

•

Stretch-out and retarget public sector cap ital investment program s.

-• R edu ce overhead and personnel costs o f the Federal G overnm en t.
•

A p p ly sound econom ic criteria to subsidy programs.

•

Consolidate categorical grant programs in to block grants.




10

T h e application o f these guidelines has required great care, judgm ent, and sensitivity. H owever,
we are putting forward over 80 proposals that w ill carry o u t these guidelines and affect virtually every
segment o f our econom y except the truly needy. The Adm inistration’s insistence on this fundam ental
principle has meant that program s benefiting m illions o f truly needy beneficiaries have not been
affected b y the spending control e ffo r t

T hese program s include social insurance benefits for the

elderly, basic unem ploym ent benefits, cash benefits for the chronically p o o r, and society’s obligations
to veterans.
T h e selection o f specific reductions has been a d ifficu lt task involvin g the enure Adm inistration
as well as m uch consultation w ith representatives o f business, labor, agriculture, m inority groups, and
State and local governments.
T h e spending reduction plan will shift Federal b u d g e t priorities so that Federal resources are
spent for purposes that are truly the responsibility o f the national g o v e rn m en t

A s the table below

indicates, our budget plans reflect the increased im portance attached to n ational defense, m aintain the
Federal G overn m en t’s support for the truly needy, and fu lfill our responsibilities for interest paym ents
on the national d e b t

T h e spending reductions will restrain Federal involvem en t in areas that are

properly le ft to State and local governm ents or to the p rivate sector.

SH TINB D E P IO IT S
IF
U G T R R IE
1962

1981

1984

46.8
26.2
6.9
26.9
106.8

157.9
239.3
64.3
193.2
654.7

249.8
313.0

43.8
24.5
6.4

24.1
36.6
9.8

32.4
40.6

m

m

18.4

D ollar Am ounts (in billions )
D O D - M ilitary
Safety net program s
N et interest
A ll other
Total

66.8
142.0
771.6

Outlay Shares (percent)
D O D • M ilitary
Safety net program s
N et interest
A ll other
Total

100.0

100.0

8.6
100.0

C arryin g ou t this program o f budget restraint w ill also halt and b eg in to reverse the tendency o f
governm ent to take an ever-larger share o f our econom ic resources. F ro m a high o f 23 percent o f the
gross national product (G N P ) in fiscal 1981, Federal o u tla ys are now scheduled to d ecline to 21.8
percent in fiscal 1982 and to reach approxim ately 19 p ercen t beginning in 1984.




TH E FEDERAL B U D G E T AN D GNP
F iscal Y e a r

O u tla y s as P ercen t
of GNP

1981
1982
1983
1984
1985
1986

23.0
21.8
20.4
19.3
19.2
19.0

11

In conjunction with the tax program that is being proposed, the present excessively high deficit
in the budget w ill be reduced and, in a few years, elim inated.

Because o f the legacy o f fiscal

commitments that were inherited b y this Administration, balancing the b udget w ill require tough
action over several years.
From a d eficit o f SS9.6 billion in 1980 — and o f a sim ilar deficit this year i f past policies had
continued — F ed eral expenditures are now estimated to exceed revenues b y $45.0 billion in 1982, and
$23.0 billion in 1983. By fiscal 1984 — under the policy recom m endations presented in this docum ent
— the Federal b u d g et should be in balance. A n d that w ill n ot be a on e-tim e occurrence.

A s shown

in the table b elow , the Federal b udget w ill actually generate a surplus in 1985 and 1986, for the first
tim e since 1969.
Federal Revenues and O utlays
F iscal
Y ear

D eficit ( - ) or
Revenues
O u tlays
Surplus ( + )
(in billions o f dollars)

1981

600.2

654.7

-54.5

1982

650.5

695.5

-45.0

1983

710.1

73 3.1

-23.0

1984

772.1

77 1.6

+ 0.5

1985

851.0

844.0

+ 7.0

1986

942.1

9 12 .1

+30.0

T h e F ed e ra l B u d g e t a n d th e E c o n o m y
The rewards that the econom y will reap with enactm ent o f the spending control plan are m any
and substantial.

In the past, excessive deficit spending has been a m ajor contributor to the initiation

and persistence o f inflation.

N o t only have Federal b u d g et deficits at tim es o f expanding private

sector activity fu ele d inflationary pressures, but governm ent’s tendency to stop fighting inflation w ith
the first signs o f a slackening econom y has persuaded firm s and workers that they n eed not fear
pricing them selves out o f business with inflationary w age and price increases.

W ith the plans for

controlling governm ent spending, the Federal budget w ill becom e a w eapon against inflation, rather
than one o f its m a jo r causes.
During the decade o f the 1970s, the Federal b u d g e t was in deficit every year.
d eficit was a relatively m odest $2.8 billion; in 1980 it w as nearly $60 billion.
alm ost 200 percent.

W hen this Adm inistration began, th e prospect was for a continuation o f these

alarm ing trends.




In 1970 the

O utlays soared b y

12

F iscal

Receipts

Y ear

O utlays

D eficit (-]

(in billions o f dollars)
193.7

196.6

-2.8

1971

188.4

211.4

-23.0

1972

208.6

232.0

-23.4

1973

232.2

247.1

-14 .8

1974

264.9

269.6

-4 .7

1975

281.0

326.2

-45.2

1976

300.0

366.4

-66.4

1977

357.8

402.7

-44.9 -

1978

402.0

450.8

-48.8

1979

465.9

493.6

-2 7 .7

1980

520.0

579.6

-59 .6

1970

M any o f the program reductions that are being proposed w ill contribute to a m ore efficient use
o f resources in the econom y and thereby high er levels o f production and incom e. N o lon ger will the
a verage Am erican taxpayer be asked to contribute to program s that further narrow private interests
rather than the general public interest
w ith user charges.

In m any cases, such services are m ore appropriately paid for

By consolidating a variety o f categorical grant program s into a few block grant

program s, the resources spent w ill provide greater benefits because the levels o f governm ent closer to
the people can better recognize their needs than can W ashington.

A n d b y reducing F ed era l deficits

an d off-b u d get F ederal financing we will ensure that F ed eral borrow ing requirem ents d o not crowd
m ore productive private activities out o f the m arket.
T h e budget that is b ein g proposed w ill restore the F ed eral G o vern m en t to its prop er role in
A m erican society.

It w ill contribute to the health o f the econom y, the strength o f our m ilitary, and

the protection o f the less fortunate m em bers o f society w ho n eed the com passion o f the governm ent
for their support.

M any special interests w h o had found it easier to look to the Federal G overnm ent

for support than to the com petitive m arket w ill be disappointed b y this budget, b u t the average
w o rk er and businessman, the backbone o f o u r N ation, w ill find that their interests are b ette r served.




13

IV. Reducing Tax Burdens
A n integral part o f the com prehensive econom ic program is a set o f tax proposals to im prove
the a fter-tax, after-in flation rewards to work, saving, and investm ent.

Inflation in evitab ly increases

the bu rd en o f taxes on individuals by pushing them into high er and higher m argin al rates.

In

businesses, inflation m akes the purchase o f new equipm ent progressively m ore d ifficu lt b y reducing
the am ou n t o f cash flow available for capital investm ent

T h e tax package addresses b oth o f these

prob lem s.

T a x R e l i e f f o r I n d iv id u a ls

A n y increase in nom inal incom e m oves taxpayers into high er tax brackets, w h eth er the increase
is real or m erely an adjustm ent for higher costs o f living.
inflation , raising average tax rates and tax burdens.
real or nom inal —

A s a consequence, taxes rise faster than

In fa c t every 10 percent increase in incom e —

prod u ces abou t a 15 p ercen t increase in F ed eral personal incom e tax receipts. A n

avera ge fam ily requ irin g a $1,500 c o s t-o f-liv in g increase to m aintain its standard o f livin g m ust have
$1,900 in wage increases to keep even after taxes.

Individual tax liabilities rose from 9.2 percent o f personal incom e in 1-965 to 11 .6 percent last
year.

T h e average tax burden w ould have risen far m ore had not m uch o f the in flation -related tax

increases been o ffse t b y periodic tax cuts.
sh arp ly for m ost taxpayers.

Marginal tax rates, how ever, have b een allow ed to rise

In 1965, 6 percent o f all taxpayers faced m arginal rates o f 25 percent or

m ore. T o d a y nearly one o f every three taxpayers is in at least the 25 percent b ra c k e t

A s taxpayers m ove into high er brackets, incentives to w ork, save, and invest are red u ced since
each addition to in com e yields less after taxes than before.

In the late 1960s and the early 1970s,

A m erican s saved b etw een 7 to 9 percent o f personal disposable incom e.
rate w as betw een 5 to 6 p e rc e n t

In 1979 and 1980, the saving

T h e com bination o f inflation and high er m argin al tax rates is

u n d o u b ted ly a m ajor factor in the low er personal saving rate.

T o correct these problem s and to im prove the after-tax return from w ork an d from saving, the
P resid en t is asking th e C on gress to reduce the marginal tax rates for individuals across the board by
10 p ercen t per yea r for the next 3 years starting July 1, 1981. T h is w ould reduce rates in stages from
a ran ge o f 14 to 70 p ercen t to a range o f 10 to 50 percen t effective January 1, 1984.

T hese rate

red u ction s will con trib u te m aterially above those which w o u ld b e attained under p resen t laws.

At

these h igh er in com e levels, the reductions in Federal tax revenues, com pared with those w hich w ould
b e o b ta in ed un der p resen t law, are $6.4 b illio n in fiscal 1981, $44.2 billion in fiscal 1982, and rise to
$ 162.4 b illion in fiscal 1986.

T h e effect o f these tax cu ts on a 4 -p erso n family w hose 1980 incom e is $25,000 w ou ld be a
$ 153 tax reduction this year, and a $809 tax reduction fo r 1984, assum ing no increase in incom e.

If

th e fa m ily ’s n om inal earnings rise to $30,300 in 1984, their tax reduction w ould b e $ 1,112 in that year.




14

T h e Adm inistration's proposals w ill bring down average individual tax receipts to 10.8 percent
o f personal incom e in 1984, still 1.6 percentage points a b o v e where it was in 1965.

W ithout these

marginal tax rate cuts, however, individual taxes w ould rise to 14.7 percent o f personal income by
1984.

Failure to enact these proposals is thus tantam ount to im posing a tax increase on the average

Am erican taxpayer.

T a x In c e n tiv e s fo r In v e s tm e n t

Since the late 1960s the rate o f net capital form ation (excluding spending m andated to m eet
environmental standards) has fallen substantially. For th e 5 years ending in 1979, increases in real net
business fixed capital averaged just over 2 percent o f the N ation’ s real net national product, or
o n e -h a lf the rate for the latter part o f the 1960s.

O n e o f the m ajor tasks facing the U .S. econom y in the 1980s is to reverse these trends and to
prom ote m ore capital investment.

T o com bat the d eclin e in productivity growth, to hasten the

replacem ent o f en ergy-in efficien t m achines and equipm ent, to com ply w ith governm ent mandates that
do not enhance production, we m ust increase the share o f o u r N ation’s resources going to investm ent
Both im provem ents in productivity an d increases in productive jo b s w ill com e from expanded
investment.

Inflation and an outdated capital equipm ent depreciation system have com bined to low er the
after-tax real rate o f return on capital investments b y business.

H igh inflation causes a large

discrepancy betw een the historic and the current replacem ent costs o f physical assets o f business.
Thus, coiporate financial records, u tilizing historic costs an d current dollar sales figures, significantly
overstate nom inal profits and understate true economic costs.

In 1980 alone, the replacem ent cost o f inventories exceed ed b y over $43 b illion the cost o f the
inventories claim ed for tax purposes.

D epreciation charges based on historical cost fell short o f the

replacem ent cost o f capital assets consu m ed by another $ 17 billion.

T hese arose from a failure to

record inventory and capital assets at their true replacem ent cost.

O n an inflation adjusted basis, m an y firms are n ow paying out m ore than their real incom e in
the form o f taxes and dividends.

T h e result is that real investm ent in equipm ent, maintenance,

m odernization, and new technology is falling further b e h in d the needs o f our econom y.

G e a rly ,

present incentives for business capital form ation are inadequate.

A s a consequence, the President is asking the C on gress to provide for an accelerated cost
recovery system for m achinery and equipm en t and certain structures according to the follow ing
classes:
•

T en years on an accelerated w rite -o ff schedule for lon g-lived public utility property (w ith
a 10 p ercen t investm ent credit) and factories, stores, and warehouses used b y their owners
(no investm ent credit, consistent with present law ).




15

•

F ive years on an accelerated w rite-o ff schedule (plus 10 percent investm ent credit) fo r all
other m achinery and equipm ent except lo n g -liv e d utility property.

•

Three years on an accelerated w rite-o ff schedule (plus 6 percent investm ent credit) for
autos and light trucks and capital costs for research and developm ent.

In addition, au d it-p ro of recovery periods would b e established for other depreciable real estate:
•

Fifteen years straight line (and no investm ent credit) for other nonresidential buildings an d
low -incom e housing.

•

Eighteen

years straight line (and no investm ent credit)

for other rental residential

structures.
A 5 -year phase-in o f the accelerated recovery rates for the 5 -y e a r and 10 -year classes is
proposed, but the effective date w ould be January 1, 1981, so that no pendin g investm ent plans are
deferred in anticipation o f the new system.

These tax changes will m ake im portant contributions to

raising econom ic activity above the levels o f which w o u ld be attained un der present laws.

A t this

higher incom e, Federal tax revenues w ould be less than those which w ou ld b e obtained under present
law, by $2.5 billion in fiscal 1981, $9.7 billion in fiscal 1982, and $59.3 b illion in fiscal 1986.
D IR E C T R E V E N U E E F F E C T S O F P R O P O S E D T A X R E D U C T I O N S
(in billions o f dollars)
(F iscal Years)
. 1981

1982

.1983

1984

1985

1986

Individual

30 Percent Phased R ate
Reduction

-6.4

-44.2

-8 1 .4

- 1 1 8 .1

-1 4 1 .5

-16 2 .4

-2.5

-9.7

-1 8 .6

-30.0

-44.2

-59.3

-8.8

-53.9

-100.0

-14 8 .1

-18 5 .7

-2 2 1.7

Business

Accelerated C ost
Recovery System
A fter Interaction
with Individual T a x

TOTAL

These changes will sim plify accounting procedures and raise after-tax profits o f businesses.

For

exam ple, a m anufacturer o f glass products that buys n ew m achinery for $100,000 in 1982 will, as a
result o f these new cost recovery allowances, reduce its tax liability b y $1,798 in that year, $2,517 in
1983, and additional amounts in later years.




16

The basic differences betw een the present accelerated depreciation law and proposed accelerated
capital cost recovery system are shown in the follow ing chan:
P R E S E N T L A W D E P R E C IA T IO N A N D A C C E L E R A T E D C O S T R E C O V E R Y S Y S T E M

Comparison of Major Features

ITEM

PRESENT LAWDEPRECIATION

ACCELERATED COST RECOVERY SYSTEM

General Applicability

Option of "facts and circumstances”
or guidelines (ADR).

Mandatory.

Guidelines allow 2-1/2 to 50 years
depending on asset type or activity,
with optional 20 percent variance for
each.

3 years (autos, light trucks, and
machinery and equipment used for
research and development), 5 years
(most machinery and equipment), or
10 years (long-lived public utility
property).

Determined by facts and
circumstances or by guidelines
ranging from 25 to 60 years
depending on the type o f building.

1 years for owner-occupied
0
factories, stores, and warehouses; 15
years for other nonresidential and for
low-income housing; 18 years for
other residential.

Straight line; or for new property,
taxpayer may elect declining balance
up to 200 percent, or sum-of-yeais
digits.

Accelerated write-off built into
tables.

Same for new residential; up to 150
percent declining balance for new,
nonresidential; up to 125 percent
declining balance for used
residential; straight line for used
nonresidential.

Same for 10-year property. Straight
line for other.

Ordinary income recapture up to
prior allowances (section 1245).

Ordinary income recapture up to
prior allowances (section 1245).

Ordinary income recapture up to
excess over straight line (section
1250).

Same for 10-year real property. No
recapture for others.

Vintage accounting.

Vintage accounting.

Ratably, or choice o f conventions.

Half-year convention built into
tables.

3-1/3 percent for machinery and
equipment written-off or held for
3-5 yean, 6-2/3 percent for 5-7
years, 10 percent if longer.

6percent for 3-year class and 10

Carryovers

Choice o f 20 percent shorter or
longer lives; straight line or
accelerated methods, where allowed.
Deductions may add to net operating
loss which can be carried over 7
yean.

Extends net operating loss and
investment credit carryover period
from 7 to 10 years.

Timing o f eligibility

When placed in service.

When placed in service, or for
property with at least a 2 year
construction period, as acquired.

Recovery periods:
Tangible personal
property

Real Estate

Recovery method:
Tangible personal
property

Real Estate

Recapture provisions:
Tangible personal
property
Real Estate

Asset accounting:
General
First year

Investment tax credit




17

percent for 5-year and 10-year
eligible property.

V. P
roviding Regulatory Relief
T h e rapid growth in F ederal regulation has retarded economic growth and contributed to
inflationary pressures.

W hile there is widespread agreem ent on the legitim ate role o f governm ent in

protecting the environment, prom oting health and safety, safeguarding workers and consum ers, and
guaranteeing equal opportunity, there is also growing realization that excessive regulation is a very
significant factor in our current econom ic difficulties.

T h e costs o f regulation arise in several ways.

First, there are the outlays for the F ederal

bureaucracy which administers and enforces the regulations.

Second, there are the costs to business,

nonprofit institutions, and State and local governments o f com plying with regulations.

Finally, there

are the longer run and indirect effects o f regulation on econom ic growth and productivity.

T h e most readily identifiable o f the costs are the administrative outlays o f the regulatory
agencies, since they appear in the Federal budget.

T hese costs are passed on to individuals and

businesses directly in the form o f higher Federal taxes.

M u ch larger than the administrative expenses

are the costs o f com pliance, which add $100 billion per year to the costs o f the goods and services we
buy. T h e most important effects o f regulation, however, are the adverse im pacts on econom ic grow th.
These

arise because

regulations m ay

discourage innovative

research

and

developm ent,

reduce

investment in new plant and equipm ent, raise unem ploym ent by increasing labor costs, and reduce
com petition. Taken together, these longer run effects contribute significantly to our current econom ic
dilem m a o f high unem ploym ent and inflation.

In many cases the costs o f regulation can be substantially reduced w ithout significantly affecting
w orthwhile regulatory goals.

U nnecessarily stringent rules, intrusive m eans o f enforcem ent, extensive

reporting and recordkeeping requirem ents, and other regulatory excesses are all too com m on.

D uring this Adm inistration’s first month in office, five m ajor steps have been taken to address
the problem o f excessive and inefficient regulation. Specifically, we have:

•

Established a Task F orce on Regulatory R e lie f chaired b y V ice President G eo rg e Bush,

•

A bolished the C o u n cil on W age and Price Stability’s ineffective program to control w age
and price increases,

•

•

Postponed the effective dates o f pending regulations until the en d o f M arch,

Issued an Executive order to strengthen Presidential oversight o f the regulatory process,
and

•

A ccelerated the decontrol o f domestic oil.




18

P r e s id e n tia l T a s k F o r c e o n R e g u la to r y R e lie f

Previous efforts to m anage the proliferation o f Federal regulation failed to establish central
regulatory oversight at the highest level.

O n January 22, the President announced the creation o f a

Task F orce on Regulatory R e lie f to be chaired by the V ice President. T h e membership is to include
the Secretary o f the Treasury, the Attorney G eneral, the Secretary o f Com m erce, the Secretary o f
Labor, the D irector o f the O ffic e o f M anagem ent and Budget, the Assistant to the President for Policy
D evelopm ent, and the C hairm an o f the C ou n cil o f Econom ic Advisers.

T h e T a sk Force’s charter is to:

•

R eview m ajor regulatory proposals b y executive branch agencies, especially those that
appear to have m ajor policy significance o r involve overlapping jurisdiction am ong
agencies.

•

Assess executive branch regulations already on the books, concentrating on those that
are particularly burdensom e to the national econom y or to k ey industrial sectors.

•

O versee the developm ent o f legislative proposals designed to balance and coordinate the
roles and objectives o f regulatory agencies.

T e r m in a tio n o f C W P S ’ s W a g e -P r ic e S ta n d a rd s P ro g r a m

T h e C o u n cil on W a ge and Price Stability (C W P S ) was created in 1974, and like m any
governm ent agencies, rapidly grew in size and scope.

But- the C W P S program o f w age-price

standards proved to be totally ineffective in halting the rising rate o f inflation.

O n January 29, the President rescinded the C W P S ’s w age-price standards program.

A s a result,

taxpayers w ill save about S1.5 m illion, em ploym ent in the Executive O ffic e o f the President will
decline b y abou t 135 people, and Federal requirem ents that businesses subm it volum inous reports win
end.

P o s t p o n in g P e n d in g R e g u la t io n s

O n January 29, the P resident also sent a m em orandum to cabinet officers and the head o f the
Environm ental Protection A g en cy (E PA ), requesting that, to the ex ten t perm itted b y

law, they

postpone the effective dates o f those regulations that w ou ld have b ecom e effective b efore M arch 29
and that they refrain from issuing any new final regulations during this 60*day period.

T h is suspension o f new regulations has three purposes:

First, it a llow s the new Adm inistration

to review the "m id nigh t" regulations issued during the last days o f the previous Adm inistration to
assure that they are co st-effective.

Second, the Adm inistration’s appointees now can b ecom e fam iliar

with the details o f the various program s for w hich they are responsible b e fo re the regulations becom e




19

final.

Lastly, the suspension allows time for the Administration, through the Presidential Task Force,

to develop improved procedures for m anagem ent and oversight o f the regulatory process.

T h e E x e c u tiv e O r d e r o n F e d e r a l R e g u la tio n

The President has signed a new Executive order designed to im prove m anagem ent o f the
Federal regulatory process.

It provides reassurance to the Am erican people o f the governm ent’s

ability to control its regulatory activities.

The Office o f M anagem ent and Budget is charged with

administering the new order, subject to the overall direction o f the Presidential T a sk Force on
Regulatory Relief,

The order em phasizes that regulatory decisions should be based on adequate information.
Actions should not be undertaken unless the potential benefits to society outweigh the potential costs,
and regulatory priorities should be set on the basis o f n et benefits to society.

T h e ord er requires

agencies to determine the m ost cost-effective approach for m eeting any given regulatory objective,
taking into account such factors as the econom ic condition o f industry, the national econom y, and
other prospective regulations.

A s part o f the developm ent o f any important regulation, the order also requires that each
agency prepare a Regulatory Impact Analysis to evaluate potential benefits and costs. T h e Task Force
will oversee this process; O M B will m ake comments on regulatory analyses, help d eterm ine which
new and existing regulations should be reviewed, and d irect the publication o f sem iannual agendas o f
the regulations that agencies plan to issue or review.

D e c o n t r o llin g D o m e s t ic O il P r ic e s

The President has also ordered the immediate decontrol o f dom estic oil prices, instead o f
w aiting until October as originally scheduled.

This has elim inated a large Federal bu reau cracy which

adm inistered a cum bersom e and inefficient system o f regulations that served to stifle dom estic oil
production, increase our dependence on foreign oil, and discourage conservation.

I n t e g r a t i n g t h e G o a l s o f R e g u l a t o r y R e l i e f w it h P a p e r w o r k R e d u c t i o n

O u r program to reduce regulatory burdens will dovetail with the efforts under th e Paperwork
R edu ctio n A ct o f 1980. Lam entably, present regulations will require Am ericans to sp en d over 1.2
b illion hours filling ou t governm ent form s during 1981.

T h is is eq u ivalen t to the an n u al labor input

for the entire steel industry.

T h e Congress responded to the n eed for consistent m anagem ent o f Federal paperw ork and
regulatory issues b y passing the Paperwork Reduction A c t o f 1980.

T h e act creates an O ffice o f

Inform ation and R egu latory A ffairs w ithin O M B with the power to review Federal regulations that
contain a recordkeeping o r reporting requirem ent and directs this agen cy to reduce th e paperwork
burden b y 15 percent..




20

F u tu r e T a r g e ts fo r R e g u la t o r y R e v ie w

T h e program o f regulatory relief is ju st getting under w ay. Future regulatory reform efforts will
b e directed not only at proposed regulations, but also at existing regulations and regulatory statutes
that are particularly burdensom e.

T his process has already begun: in the first month o f the

Adm inistration several cabinet departments and agencies— on their ow n initiative and in coordination
with the Task Force— have taken action on particularly controversial rules.

F o r example, rules

m andating extensive bilingual education programs, passive restraints in large cars, the labeling o f
chem icals in the w orkplace, controls on garbage truck noise, and increased overtim e payments for
executives have been withdrawn or postponed.

The actions taken already are expected to save the

A m erican public and industry alm ost $1 billion annually. T h e Adm inistration w ill b e reviewing a host
o f other regulations in the near future.

L e g is la tiv e C h a n g e s

N o t all o f our regulatory problem s can be resolved satisfactorily through more effective
regulatory m anagem ent and decisionm aking.
regulatory decisions.

Existing regulatory statutes too often preclude effective

M any o f the statutes are conflicting, overlapping, or incon sistent

Some force

agencies to prom ulgate regulations while giving them little discretion to take into account changing
conditions or new infonnation.

O ther statutes give agencies extrem ely broad discretion, which they

have sometimes exercised unwisely.

T h e Adm inistration will exam ine all legislation that serves as the foundation for m ajor
regulatory program s. T h is om nibus review, spearheaded b y the Presidential Task F o rce on Regulatory
R elief, will result in recom m endations to reform these statutes.

T h e Task F o rce will initially

concentrate its efforts on those laws scheduled for Congressional oversight or reauthorization, such as
the C lean A ir A c t




21

VI. Controlling M
oney an Credit
d
Monetary policy is the responsibility o f the Federal Reserve System, an independent agency
within the structure o f the government.
independence.

The Administration will do nothing to underm ine that

A t the same time, the success in reducing inflation, increasing real incom e, and

reducing unemployment will depend on effective interaction o f m onetary policy with other aspects o f
econom ic policy.
T o achieve the goals o f the Administration’s economic program, consistent m onetary policy
m ust be applied. Thus, it is expected that the rate o f money and credit growth will be brought down
to levels consistent with noninflationary expansion o f the econom y.
If monetary policy is too expansive, then inflation during the years ahead w ill continue to
accelerate and the Administration’s economic program will be underm ined.
will intensify.

Inflationary psychology

Wages, prices, and interest rates will reflect the b e lie f that inflation —

and the

destructive effects o f inflation — will continue.
By contrast, i f monetary policy is unduly restrictive, a different set o f problem s arises,
unnecessarily aggravating recession and unemployment.

A t times in the past, abruptly restrictive

policies have prompted excessive reactions toward short-term monetary ease.

A s a result, frequent

policy changes can send confusing signals, and the additional uncertainty underm ines long-term
investment decisions and economic growth.
With money and credit growth undergoing steady, gradual reduction over a period o f years, it
will be possible to reduce inflation substantially and permanently.

In this regard, the Adm inistration

supports the announced objective o f the Federal Reserve to continue to seek gradual reduction in the
growth o f money and credit aggregates during the years ahead. Looking back, it seems clear that i f a
policy o f this kind had been successfully followed in the past, inflation today w ould b e substantially
lower and would not appear to be so intractable.
Until recently, the Federal Reserve had attempted to control m oney growth by setting targets
for interest rates, particularly the rate on Federal funds.

Experience here and abroad has shown

repeatedly that this interest rate management approach is not sufficient to achieve reliable control.
M istakes in predating movements in econom ic activity or tendencies on the part o f policym akers to
avoid large interest rate fluctuations can lead to undesirable gyrations in the rate o f m on ey growth.

P~

S S L

2

" * Fed6ral ReSerVC ad0pted “
r

1979>

Federal Reserve sets

dered 10 bC C° nSiStenl With 016 desired exPansi ° n in the m onetary

T
Z6
d t0 ^
° Ver 3 mUCh w ider ran8e in response to changes in the
dem and for money and c re d it A num ber o f factors - such as the introduction o f credit controls and
*L

their subsequent removal and frequent shifts in announced fiscal policies -

have contributed to

«
j S S Z T t o i " ” " * r a ,S “ dkm0ne“ >
p a * y « . A t the same tim e,
w e need to learn rrom the experience with the new techniques and seek further im provem ents T h e
Federal Reserve has undertaken a study o f last year’s experience. W e look forward to the results and
encourage them to m ake the changes that appear wananted.




22

In that connection, success in m eeting the targets that the Federal Reserve has set will itself
increase confidence in the results o f policy.

Otherwise, observers are likely to pay excessive attention

to short-run changes in m oney grow th and revise anticipations upward or downward unnecessarily.
W ithout confidence in the long-term direction o f p o licy, such short-run changes may lead to
unwarranted b u t disturbing gyrations in credit, interest rates, com m odity prices, and other sensitive
indicators o f inflation and econom ic grow th.
Better m onetary control is not consistent with the m anagem ent o f interest rates in the short run.
But, with m onetary policy focusing on long-term objectives, the resultant restraint on money and
credit growth w ould interact with the tax and expenditure proposals to low er inflation as well as
interest rates.
T h e Adm inistration w ill confer regularly with the F ed eral Reserve Board on all aspects o f our
econom ic program .

T h e policies that are proposed in the program will help to advance the efforts o f

the independent F ed eral Reserve System .

In particular, the substantial reductions o f the Federal

G overnm en t’s deficit financing and the achievem ent o f a balanced budget in 1984 and the years that
follow should enable the Federal R eserve System to red u ce dramatically the growth in the m oney
supply.
T o that end, the economic scenario assumes that the growth rates o f m oney and credit are
steadily reduced from the 1980 levels to o n e -h a lf those lev els b y 1986.
W ith the F ed eral Reserve gradually but persistently reducing the grow th o f m oney, inflation
should decline at least as fast as anticipated.
inflationary expectations w ill decline.

M oreover, i f m onetary grow th rates are restrained, then

A n d since interest rate movem ents are largely a m irror o f price

expectations, reduction in one will produce reduction in the other.




23

VII. A New B
eginning for the Econom
y
This plan for national recovery represents a substantial break with past policy.
is based on the prem ise that the people who make up the econom y
investors, buyers, and sellers —

do not need the governm ent to m ake reasoned and intelligent

decisions about how best to organize and run their own lives.
current environment.

T h e new policy

workers, managers, savers,

They continually adapt to best fit the

The most appropriate role for governm ent econom ic policy is to provide a

stable and unfettered environment in which private individuals can confidently plan and m ake
appropriate decisions. The new recovery plan is designed to bring to all aspects o f governm ent policy
a greater sense o f purpose and consistency.

Central to the new policy is the view that expectations play an important role in determ ining
economic activity, inflation, and interest rates.

Decisions to work, save, spend, and invest depend

crucially on expectations regarding future government policies.

Establishing an environm ent which

ensures efficient an d stable incentives for work, saving, and investment now and in the future is the
cornerstone o f the recovery plan.

Personal tax reductions w ill allow people to keep m ore o f what they earn, providing increased
incentives for work and saving.

Business tax reductions w ill provide increased incentives for capital

expansion, resulting in increased productivity for workers.

Spending reductions and elim ination o f

unneeded regulation will return control over resources to the private sector where incentives to
economize are strongest.

Stable monetary policy, com bined with expanding productive capacity, w ill

bring about a reduction o f the inflation rate.
Inflation control is

best achieved with a tw o-edged policy designed both to lim it the rate o f

increase in the m oney stock and to increase the productive capacity o f the econom y.

N either policy

can be expected to. achieve adequate results alone.
A

stable monetary policy, gradually slowing grow th rates o f m oney and credit along a

preannounced and predictable path, will lead to reductions in inflation. A t the same time, the effects
o f supply-oriented tax and regulatory changes on work incentives, expansion and im provem ent o f the
capital stock, and improved productivity will boost output and create a "bu yers’ m arket" for good s
and services.
As a result o f the policies set forth here, our econom y’s productive capacity is expected to grow
significandy faster than could b e achieved with a continuation o f past policies.

Specifically, real

economic activity is projected to recover from the 1980-81 period o f weakness and m ove to a 4 to 5
percent annual grow th path through 1986, as shown in the table below. Concurrently, the general rate
o f inflation is expected to decline steadily to less than 5 percent annually b y 1986 from the current 10
percent plus rate.




24

E O O ICA M T N
C N M SSU P IO S
(C L N A Y A S
A E D R E R)
__________________________________ 1981
N om inal G ross N ational
Product (billions)
(Percent C han ge)

1982

1983

1984

1985

1986

$2,920.0

$3,700.0
12.4

$4,098.0

12.8

10.8

$4,500.0
9.8

$4,918.0
9.3

1,497.0

1,560.0
4.2

1,638.0
5.0

1,711.0
4.5

1,783.0
4.2

1,858.0
4.2

195.0
9.9

211.0

226.0
7.0

240.0

6.0

252.0
5.4

265.0
4.9

274.0

11.1

297.0
8.3

315.0

6.2

333.0
5.5

348.0
4.7

363.0
4.2

7.8

Real G ross N ational
Product (billions.
1972 dollars)
(Percent C han ge)

$3,293.0

11.1

7.2

6.6

6.4

6.0

5.6

1.1

Im plicit Price
D eflator
(Percent C han ge)
Consum er Price Index *
1967 = 100
(Percent C han ge)
U nem ploym ent Rate
(Percent)

8.3

*CPI for urban wage earners and clerical workers (C PI-W ).
In contrast to the inflationary dem and-led booms o f the 1970s, the m ost significant growth o f
econom ic activity will occur in the supply side o f the econom y.

Not o n ly will a steady expansion in

business fixed investment allow our econom y to grow w ithout fear o f capacity-induced inflation
pressures, b u t it will also increase productivity and red u ce the grow th o f production costs by
incorporating new and more high -efficien t plants, m achinery, and technology into our m anufacturing
base. T h e result will be revitalized growth in the real incom es and standards o f living o f our citizens
and significantly reduced inflationary pressures.

A s our econ om y responds to a new era o f econom ic

policy, unem ploym ent will be significantly reduced.
T h e Adm inistration’s plan for national recovery w ill take a large step toward im proving the
international econom ic environm ent by repairing dom estic conditions.

Im proving expectations and

slowing inflation will enhance the dollar as an international store o f valu e and contribute to greater
stability in international financial markets.

A s interest rates come d o w n and faster U .S. grow th

contributes to rising world trade, econom ic expansion in other countries w ill also accelerate.

T his

Adm inistration w ill work closely with the other major industrial countries to prom ote consistency in
econom ic objectives and policies so as to speed a return to noninflationary growth in the w orld
econom y.

F inally, rising U .S. productivity will enhance o u r ability to com pete with other countries in

world m arkets, easing protectionist pressures at hom e and thus strengthening our ability to press other
countries to reduce their trade barriers and export subsidies.
T h e econom ic assum ptions contained in this message may seem optim istic to som e observers.
Indeed they d o represent a dram atic departure from the trends o f recent years — but so do the
proposed policies.

In fact, i f each portion o f this com prehensive econom ic program is put in place —

quickly and com pletely —

the

econom ic environm ent cou ld im prove

envisioned in these assumptions.




25

even m ore rapidly

than

Bui, if the program is accepted piecemeal — if only those aspects that are politically palatable
are adopted — then this economic policy will be no more than a repeat o f what has been tried before.
And we already know the results o f the stop-and-go policies o f the past.
Indeed, if we as a Nation do not take the bold new policy initiatives proposed in this program,
we will face a continuation and a worsening o f the trends that have developed in the last tw o decades.
We have a rare opportunity to reverse these trends:

to stimulate growth, productivity, and

em ploym ent at the same time that we move toward the elimination o f inflation.




26




I I I . P r e s i d e n t 's B u d g e t R e f o r m P l a n







THE W H ITE
O ffic e

of

th e

HOUSE

P ress

S e c re ta ry

BUDGET REFORM PLAN

N O T IC E

AND

EMBARGOED FOR W IR E T R A N S M IS S IO N
U N T IL 4 s 0 0 P .M . ( E . S . T . )
FOR R ELEASE U N T IL 9 : 0 0 P . M . ( E . S . T . )
W ed n esd ay, F eb ru a ry 1 8 , 1 981

Jam es S c o t t B rad y
A s s is t a n t to th e P r e sid e n t
and P r e s s S e c r e ta r y




INTRODUCTION

T h is b u d g e t
P r e s i d e n t 's
in c lu d e :

r e fo r m p la n i s
o v e r a ll
p la n

one
fo r

o f se v e r a l e s s e n tia l p a rts o f
th e
e c o n o m ic r e c o v e r y .
O th e r e le m e n ts

—

—

s ig n if ic a n t m o d ific a tio n o f d e p r e c ia tio n
p la n t
a n d e q u ip m e n t i n o r d e r t o p r o m o te
c r e a t i o n , and i n d u s t r i a l r e v i t a l i z a t i o n ;

—

a
fa r -r e a c h in g
r e g u la to r y
a lle v ia te
e x c e s s iv e
cost
rem ove u n n e c e s s a r y b a r r i e r s

—

T h ese
b e in g

a 3 - y e a r 30% r e d u c t i o n
in
a ll
in d iv id u a l
in c o m e
ta x
r a t e s d e s ig n e d t o r e s t o r e i n c e n t i v e s and p ro m o te ren ew ed
e c o n o m ic g ro w th ?

a n ew p a r t n e r s h i p d e s i g n e d t o
th a t
w ill
red u ce
e x c e ssiv e
r e s t o r e a s t a b le c u rre n c y and

e le m e n ts
r e le a s e d

a r e d is c u s s e d in
m ore
w it h t h i s d o c u m e n t.

s c h e d u le s
in v e s tm e n t,

fo r
jo b

r e fo r m
p rogram
th a t
w ill
and
c o m p lia n c e
b u rd e n s and
t o e c o n o m ic e x p a n s i o n ; an d
a c h ie v e a m o n e ta ry
p o lic y
r a t e s o f m oney g r o w th an d
h e a lth y fin a n c ia l m a rk e ts.
d e ta il

in

th e

m a te r ia ls

The
budget
r e fo r m
p la n
o u tlin e s
a
c o m p r e h e n s iv e , m u lt i -y e a r
p ro g ra m f o r e n d in g t h e
recent
u n s u s ta in a b le
u pw ard
s p ir a l
o f
F ederal
s p e n d in g
and b o r r o w in g .
I t i s an e s s e n t i a l c o r n e r s t o n e
of
th e
P r e s i d e n t 's
o v e r a ll
e c o n o m ic
program .
Its
fu ll
im p le m e n ta tio n
is
c r u c ia l to a c h ie v in g a s u s ta in e d r e d u c tio n in
in fla tio n
and
in te r e s t
ra te s,
and
to
r e s to r in g
fin a n c ia l
s t a b i l i t y t o t h e U .S . eco n o m y .
M a jo r f e a t u r e s i n c l u d e :
—

A $ 4 1 .4 b i l l i o n r e d u c tio n in 1 9 8 2
ou
th e
cu rren t
p o lic y b a se , to g e th e r w
u ser ch arges
and
$ 5 .7
b illio n
in
r e d u c tio n s
fo r
a
to ta l
o f
$ 4 9 .1
s a v in g s .

—

A d r a m a t i c dow nw ard s h i f t
in
F ederal
s p e n d in g
g ro w th
ra te s,
b r in g in g
th e
16% t r e n d o f t h e r e c e n t p e r i o d t o
a b o u t 7% o v e r t h e n e x t s e v e r a l f i s c a l y e a r s .
A s te a d y r e d u c tio n in
a
b a la n c e d
budget
th e re a fte r.

—

th e F e d e r a l
in
1984

tla y s
com pared
to
ith $ 2 .0 b i l l i o n
in
o ff-b u d g e t
o u tla y
b illio n
in f i s c a l

d e f i c i t , r e s u ltin g
in
and
m od est
s u r p lu s e s

The f i r s t c o m p r e h e n s iv e p r o p o s a l in m ore th a n
a
to
overh aul
th e
N a t i o n 's
overgrow n
$350
e n title m e n ts sy ste m .
P ro p o se d r e v i s i o n s o f fo o d

decade
b illio n
sta m p s,

e x te n d e d
u n e m p lo y m e n t
b e n e fits,
tra d e
a d ju s tm e n t
a s s i s t a n c e , .s t u d e n t
lo a n s ,
v a r io u s
secon d ary
s o c ia l
s e c u r ity
b e n e fits ,
m e d ic a id ,
and
o th e r
e n title m e n t




-1-

program s
g r o w in g
—

save

$ 1 8 .9

$ 9 .4

b illio n

b illio n

by

a id ,

P rop osed

and

F ed eral

c o n s o lid a tio n

1982,

w ith

s a v in g s

a c tu a l
e lim in a tio n
of
F e d e r a l program s in c lu d in g
and d e v e lo p m e n t
p rogram s,

su p p ort
of

in

1986.

S u b s ta n tia l
c u tb a c k s
or
u n e s s e n tia l
or
in e ffe c tiv e
CETA, A m tr a k , e n e r g y r e s e a r c h
im p a c t

_
_

w o u ld
to

fo r

n e a r ly

th e

100

a rts.

narrow

c a te g o r ic a l

gran t
p rogram s
in to
a
fe w
f l e x i b l e b lo c k g r a n ts
S t a t e and l o c a l s u p p o r t o f e d u c a t i o n , h e a l t h and
s o c ia l
s e r v ic e s .
S a v i n g s b y 1 9 8 3 w o u ld e x c e e d $ 4 b i l l i o n .
—

S h arp
r e d u c tio n s
in
F ederal
s u b s id ie s
fo r
s y n fu e ls
d e v e lo p m e n t,
E x p o r t -I m p o r t
Bank
a c tiv itie s ,
and
th e
d a i r y i n d u s t r y , a lo n g w it h a s u b s t a n t i a l s t r e t c h - o u t
of
fu n d in g
f o r h ig h w a y s , a i r p o r t s , sew age t r e a t m e n t p l a n t s
and w a te r

p r o je c ts .

In cre a se d u ser fe e s fo r b arge o p e r a to r s ,
a ir w a y
u s e r s , and c o m m e r c ia l and r e c r e a t i o n a l v e s s e l s .

sy ste m

As
a
r e s u lt
of
t h e s e b r o a d ly b a s e d c u t b a c k s in lo w e r p r i o r i t y
F ed eral
a c tiv itie s
and
s h a r p ly
c o n s tr a in e d
o v e r a ll
s p e n d in g
le v e ls ,
in te r n a l bu d get p r io r it ie s w i l l s h i f t d r a m a tic a lly .
The
h ig h e s t p r i o r i t y w i l l b e g r a n te d t o n e c e s s a r y fu n d in g g r o w th
fo r
d e fe n se ,
s o c ia l
s e c u r ity
b e n e fits ,
in c lu d in g
c o s t-o f-liv in g
p r o t e c t i o n , and o t h e r e s s e n t i a l s o c i a l s a f e t y n e t p r o g r a m s .
As a
r e s u l t , t h e d e fe n s e s h a r e o f F e d e r a l s p e n d in g w i l l r i s e fr o m
24%
at
p resen t
to
32%
by
1984;
s o c ia l
s a f e t y n e t s p e n d in g w i l l
i n c r e a s e f r o m 37% t o 4 1 % ; a l l o t h e r F e d e r a l p r o g r a m s w i l l d e c l i n e
fr o m 29% o f t h e b u d g e t t o 1 8 % , a n d d e b t s e r v i c e
w ill
a ls o
fa ll
so m e w h a t.

H IS T O R IC A L

SE T TIN G

The
la s t
25
years
have
been
c h a r a c te r iz e d
by u n s u s ta in a b le
in c r e a s e s in F e d e r a l s p e n d in g .
T h i s u p w a r d m om entu m
in
program
g ro w th
has
fa r
exceeded
th e
g ro w th
in
our
ta x
base.
Tax
in c r e a s e s
b o th le g is la t e d in c r e a s e s
and
a u to m a tic
in c r e a s e s
th a t
occur
as
in c o m e
g ro w th
m oves
ta x p a y e rs in to h ig h e r ta x
b r a c k e t s — h a v e b e e n im p o s e d t o
fin a n c e
th is
program
g ro w th .
Even
t h e s e t a x i n c r e a s e s , w h ic h h a v e b e e n a f u n d a m e n t a l c a u s e o f
th e e c o n o m ic s t a g n a t i o n t h a t t h i s c o u n t r y h a s
e x p e r ie n c e d ,
have
been
in s u ffic ie n t
t o f in a n c e th e la r g e s p e n d in g g ro w th t h a t h a s
nno^r r e ^ ‘ * i S
3
f e s u lt'
th is
c o u n try
has
e x p e r ie n c e d
u n p re c e d e n te d
p e a c e tim e
b u d g e t d e f i c i t s i n r e c e n t y e a r s a n d n ow
la b o r s u nd er n e a r ly a t r i l l i o n d o l l a r n a t i o n a l d e b t .
Th.

sh arp

u pw ard

over
u n o r e S d J l^
u n p re c e d e n te d
a c c e le r a te .




s p ir a l

g ro w th

of

in

F ed eral

F ederal

s p e n d in g

s p e n d in g

is

has

sh ow n

t h . absen ce o f
budget c o n tr o l a c tio n s , th re a te n s
to
F ro m
1 9 5 5 t o 1 9 6 4 , s p e n d in g in c r e a s e d

-2-

in

a c c e le r a te d

T a b le

1.

s h a r p ly

d e c is iv e and
c o n tin u e
to
“
a ll a n n u a t

a vera g e r a te o f ab o u t 6% .
T h i s r a t e a c c e l e r a t e d t o a b o u t 10%
in
th e
1 9 6 4 -7 6
p e r io d
a n d i s e s t i m a t e d t o b e c l o s e t o 12% f o r t h e
1 9 7 6 -8 1 p e r i o d , o r d o u b le th e
ra te
of
1 9 5 5 -6 4 .
In
th e
m ost
recent
p e r i o d , s p e n d i n g i s e s t i m a t e d t o i n c r e a s e a t a 16% a n n u a l
r a te o v e r 1 9 7 9 -8 1 .

T a b le

1 . — GROWTH IN

FEDERAL

SPENDING

1 9 5 5 -6 4

1 9 7 6 -8 1

1 9 7 9 -8 1

A n n u a l R a te o f G ro w th ( P e r c e n t ) ;
N a t i o n a l d e f e n s e ...............................................
N o n d e f e n s e ..................................................................

2 .9
9 .9

1 1 .9
1 2 .0

1 7 .0
1 5 .5

T o t a l ...............................................................

6 .3

1 1 .9

1 5 .9

9 .4
9. 3

5 .3
1 6 ■8

5 .3
1 7 .0

2 2 .1

2 2 .3

A v e r a g e O u t l a y S h a r e o f GNP;
N a t i o n a l d e f e n s e ...............................................
N o n d e f e n s e ..................................................................
T o t a l ...............................................................

1 8 .7

A s a s h a r e o f g r o s s n a t i o n a l p r o d u c t (G N P ), t h e n o n d e fe n s e s e c t o r
o f th e bu d get
has
in c r e a s e d
d r a m a tic a lly
s in c e
th e
p r e -1 9 6 4
p e r io d .
D u r in g t h i s p e r i o d , m any o f t h e G r e a t S o c i e t y a n d n e w e r
e n t i t l e m e n t p r o g r a m s cam e i n t o f u l l b lo o m .
T h is r a p id g ro w th
in
n o n d e fe n s e
s p e n d in g
occurred
p a r tly
at
th e
exp en se o f sh arp
r e d u c t i o n s i n t h e d e f e n s e s h a r e o f GNP a n d p a r t l y a t t h e
exp en se
o f an i n c r e a s e in t o t a l F e d e r a l s p e n d in g a s a s h a r e o f GNP.
It
is
a ls o
s ig n ific a n t
t h a t w h ile in th e f i r s t p e r io d F e d e r a l
reven u es averaged ju s t
1 8 .0 %
o f
GNP/
budget
s u r p lu s e s
w ere
fr e q u e n tly
a c h ie v e d
and
net
a d d itio n s
to
th e
n a tio n a l d eb t
a m o u n te d t o o n l y $ 3 3 b i l l i o n , o r an a v e r a g e o f a b o u t
$3
b illio n
per
year.
D u r in g
th e 1 9 7 6 -8 1 p e r io d , th e F e d e r a l ta x sh a re o f
GNP i n c r e a s e d s h a r p l y , y e t n e t a d d i t i o n s
to
th e
n a tio n a l
debt
t o t a l e d $ 3 9 0 b i l l i o n , o r b e t t e r th a n $ 6 0 b i l l i o n p e r y e a r .




-3-

PRELIMINARY BUDGET OUTLOOK

T>ie

P r e sid e n t’ s

o v e r a ll

e c o n o m ic

p la n

% t
D o lic v b a se
in c lu d e s
a
s u b s ta n tia l
d e fe n s e .
W hen
a l l o w a n c e i s m ade f o r

cannot

su cceed

w ith o u t

a

«SS.t
u n d e r fu n d in g
of
n a tio n a l
fu n d in g im p * ? ^ e d ^ r e a d in e s s

and a s te a d y b u ild u p o f
c o n v e n tio n a l
and
s tr a te g ic
fo r c e s
l e v e l s c o m m e n su ra te w it h p r e s e n t w o r ld c o n d i t i o n s , t o t a l s p e n i n g
g ro w th
r a t e s w o u ld r e a c h e v e n m ore i n f l a t i o n a r y l e v e l s .
O u tla y s
w o u ld g r o w a t d o u b l e d i g i t r a t e s , h i t t i n g t h e o n e t r i l l i o n d o l l a r
s p e n d in g

m a rk

by

1986.

The P r e s id e n t h a s t h e r e f o r e d e te r m in e d t h a t in o r d e r
to
re sto re
c o n fid e n c e
in
f i n a n c i a l m a r k e ts and a c h i e v e r a p i d a n d s u s t a i n e d
r e d u c tio n in p r e s e n t d o u b le d i g i t i n f l a t i o n and
in te r e s t
ra te s,
F ederal
s p e n d in g
g r o w t h m u s t b e h e l d t o 6% i n 1 9 8 2 w i t h s i m i l a r
r e s tr a in t

in

fu tu r e

fis c a l

years.

To a c h i e v e t h i s c r i t i c a l o b j e c t i v e , F e d e r a l o u t l a y s m u st b e
h e ld
to
$696
b illio n
in 1 9 8 2 , $ 7 3 3 b i l l i o n in 1 9 8 3 and t o s i m i l a r l y
r e s t r a in e d l e v e l s in f u t u r e y e a r s .
T h ese
s u b s ta n tia lly
reduced
ra te s
o f in c r e a s e r e la t iv e to th e c u r r e n t p o lic y b a se c o n s t i t u t e
a sh arp r e v e r s a l o f r e c e n t tr e n d s :
r a th e r th a n in c r e a s in g f a s t e r
t h a n t h e g r o w t h r a t e o f n o m i n a l GNP a n d
th e
F ederal
ta x
base,
F ed eral
s p e n d i n g w o u ld g r o w s u b s t a n t i a l l y s l o w e r — a n e s s e n t i a l
p r e - c o n d i t i o n f o r e n d in g i n f l a t i o n .
T h is d ocu m en t p r e s e n t s
a
p r e lim in a r y
e s tim a te
of
th e
budget
sa v in g s
m easu res
r e q u ir e d
to
a c h i e v e t h e P r e s i d e n t 's s p e n d in g
lim ita tio n g o a ls .
M ore r e f i n e d e s t i m a t e s w i l l
be
sen t
to
th e
C on gress
on
M arch 1 0
w h en t h e p r e s e n t i n t e n s i v e A d m i n i s t r a t i o n
r e v ie w and r e v i s i o n o f t h e 1 9 8 2 b u d g e t i s c o m p le t e d .
N e v e r th e le s s ,
T a b le 2
p r o v id e s
a
c le a r
in d ic a tio n
o f
th e
m a g n itu d e
of
th e
u n a v o id a b le
ta sk
ahead.
To s t a y w it h in t h e
p r o p o s e d 1 9 8 2 s p e n d in g c e i l i n g , c u r r e n t p o l i c y o u t l a y s , i n c l u d i n g
an a d d i t i o n a l $ 7 . 2 b i l l i o n f o r d e f e n s e , m u st b e r e d u c e d b y
$ 4 1 .4
b illio n
or by 6% .
To m a in ta in fu t u r e y e a r c e i l i n g s w i l l r e q u i r e
even la r g e r r e d u c tio n s
fr o m
th e
cu rren t
p o lic y
b ase.
T h ese
sa v in g s
r e d u c tio n
ta rg e ts
are
now e s t i m a t e d a t $ 8 0 b i l l i o n
in
1 9 8 3 and s l i g h t l y in e x c e s s o f $ 1 0 0 b i l l i o n b y 1 9 8 4 .
Due t o t h e h u g e l e a d t i m e b u i l t i n t o t h e F e d e r a l
budget
b e tw e e n
s p e n d in g
p o lic y
changes
and a c t u a l r e d u c t io n s
o u tla y s i t i s im p e r a tiv e th a t l e g i s l a t i v e
and
e x e c u tiv e

1/

p rocess
in c a sh
a c tio n

The c u r r e n t p o l i c y b a s e
u sed
in
th is
docum ent
g e n e r a lly
r e fle c ts
e s tim a te s
of
w hat
b u d g e t a m o u n ts w o u ld b e i f n o
c h a n g e s w e r e m ad e t o c u r r e n t p r o g r a m o r s e r v i c e l e v e l s u s i n g
c u r r e n t e c o n o m ic a s s u m p t io n s .
H ow ever,
d e fe n s e
p u rch ases
and
fo r e ig n
a id a r e in c lu d e d in t h e b a s e i n t h e a m o u n ts in
th e C a r te r a d m in is t r a t io n ’ s b u d g e t.




-4-

T a b l e 2 . — BUDGET S A V IN G S PLAN
(O u tla y s in b i l l i o n s o f d o l la r s )

1981

1982

1983

1984

1986

1986

6 5 7 .8
1. 3

729.7
7.2

792.1
20.7

849.0
27.0

911.4
50.2

972.8
63.1

C u r r e n t p o l i c y b a s e w ith
a d e q u a t e d e f e n s e ..................................................

6 5 9 .1

736.9

812.8

876.0

961.6

1035.9

P r e s i d e n t 's B u d g e t P l a n ;
P r o p o s e d s p e n d i n g c e i l i n g ..........................
B u d g e t s a v i n g s t a r g e t ......................................

6 5 4 .7
4 .4

695.5
41.4

733.1
79.7

771.6
104.4

844.0
117.6

912.1
123.8

E x is tin g B udget S t a t u s ;
C u r r e n t p o l i c y b a s e ............................................
A d d e d d e f e n s e f u n d s 1 / ...................................

P r e s i d e n t 's B u d g e t S a v in g s P r o p o s a l s :
A c t i o n s r e c o m m e n d e d n ow o r t o b e
i n c lu d e d in M arch r e v i s i o n s :
B u d g e t o u t l a y r e d u c t i o n s ...................
O ff-b u d g e t o u tla y r e d u c t i o n s ...
U s e r c h a r g e s ( r e c e i p t s ) ......................
S u b t o t a l ............................................................

4 .8
( 0 .7 )
( -------)
( 5 .5 )

B udget s a v in g s t o be p re se n te d
s u b s e q u e n t l y ..................................................

41.4
(5.7)
(2.0)

58 i 5
(7.4)
(2.6)

73.7
(9.2)
(3.0)

86.6
(11.1)
(3.5)

95.8
(13.1)
(3.9)

(49.1)

(68.5)

(85.9)

(101.2)

(112.8)

21.2

30.7

31.0

28.0

1 / T h e s e i n c r e a s e d a m o u n ts d o n o t i n c l u d e t h e s a v i n g s f o r d e f e n s e
s p e c ifie d
la te r
in
th is
d o cu m e n t.
They
rep resen t
an
o u ts id e
e s tim a te
o f p o t e n t ia lly n e c e ssa r y d e fe n se
in c r e a s e s a f t e r ta k in g s a v in g s in t o a c c o u n t.
T h e s e a m o u n t s w i l l b e f u l l y r e v i e w e d a n d m ay
be

r e v is e d




fo r

th e

M arch

budget

s u b m is s io n .

commence

Mediately

on

P « s ! ^ n ? s la b u ^ e r " a " n gf

g o a is .

S e c tio n

II

of

th is

docum ent

th e
fo r m
of
e n title m e n t
ch an ges,
b lo c k
grant
le g is la tiv e
p r o p o s a ls and p r o p o s e d a p p r o p r ia t io n r e s c i s s i o n s ,
d e fe r r a ls
r e v is e d
th e

1982

e a r lie s t

a u th o r ity
p o s s ib le

re q u e sts

w ill

be

fo r w a rd e d

to

C on gress

d a te.

In a d d it io n , th e P r e s id e n t h a s
u r g e n tly
in s tr u c te d
a ll
a 9 « £ < ]y
h e a d s and o t h e r e x e c u t i v e b r a n c h p o l i c y m a k e rs t o d e v e l o p f u r t h e r
p r o p o s a ls
and
p la n s
fo r
r e d u c in g o v e r h e a d c o s t s , p r o g r a m m a tic
e x p e n d itu r e s ,
and
o th e r
s a v in g s
in
u n e s s e n tia l
govern m ent
s p e n d in g .
T h ese a d d it io n a l s a v in g s m easu res w i l l be p r e s e n te d in
th e
1 9 8 2 b u d g e t r e v i s i o n s d u r in g t h e s e c o n d w eek in M arch a n d in
a d d itio n a l m essages to th e
C on gress
in
th e
w eeks
and
m o n th s
ahead.
For t h e s e r e a s o n s , th e e s t im a t e s in t h i s d ocu m en t a r e n e c e s s a r i l y
p r e lim in a r y .
They
are
d e r iv e d
by
r e p r ic in g
base
fig u r e s
a v a i l a b l e in th e J a n u a ry 1 9 8 2 b u d g e t.
M ore p r e c i s e a m o u n ts
w ill
b e p r e s e n t e d in t h e M arch r e v i s i o n s .

R E C E IP T S WITH TAX REDUCTION PROGRAM

T a b le 3
d e m o n stra te s
th e
c u r r e n tly
e s tim a te d
im p a c t
o f
th e
P r e s i d e n t ’ s t a x r e d u c t i o n p r o p o s a ls on b o t h F e d e r a l r e c e i p t s
and
on t h e t a x b u r d e n b o r n e b y w o r k e r s an d b u s i n e s s e s .
U n der c u r r e n t
la w ,
r e c e ip ts
w o u ld c o n t i n u e t o e x h i b i t t h e d e b i l i t a t i n g g r o w t h
r a te s o f th e r e c e n t p a s t , r is in g a t a
14%
annual
ra te
th ro u g h
1986.
M oreover,
th e
F ederal
ta x
sh are
of
GNP w o u l d h i t a n
h i s t o r i c h i g h a t 2 2 .0 % i n 1 9 8 2 a n d w o u ld c o n t i n u e t o r i s e t o o v e r
24% b y 1 9 8 6 .
T h is c o n t r a s t s m a r k e d ly , w ith t h e a v e r a g e
18%
ta x
s h a r e o f GNP d u r i n g t h e h i g h GNP g r o w t h p e r i o d o f t h e m i d - 1 9 6 0 ' s .
The
P r e s i d e n t 's
ta x
r e d u c tio n
program
e lim in a te s
th e se
p r o s p e c t i v e i n c r e a s e s and lo w e r s o v e r a l l F e d e r a l t a x
burd en s
to
le v e ls
m ore
c o m p a tib le
w ith v ig o r o u s p r i v a t e s e c t o r g r o w th and
ren ew ed e c o n o m ic i n c e n t i v e s .
N e v e r th e le s s ,
d e s p ite
s u b s ta n tia l
ta x
ra te
re d u c tio n s
and
th e
s te a d ily fa llin g in fla t io n r a te s
a ssu re d in th e
A d m in is tr a tio n
e c o n o m ic
s c e n a r io l / ,
F ed eral
r e c e ip ts ,
i n c l u d i n g m o d e s t a m o u n ts fr o m t h e P r e s i d e n t 's u s e r f e e
p r o p o s a l s , w o u ld g r o w b y n e a r l y 10% a n n u a l l y .
The e x p e c te d
$342
b illio n
r is e
th a n a d e q u a te
fu tu r e b u d g et

in F e d e r a l r e c e ip t s o v e r
t o fu n d p la n n e d
o u tla y
d e fic its .

th e 1 9 8 1 -8 6
le v e ls
and

1/

e c o n o m ic
recovery

c o n ta in e d in th e p la n
fo r
s e c t io n o f t h i s d o c u m e n t.

D e ta ile d
e c o n o m ic




a s s u m p tio n s a r e
and in th e l a s t

-6-

p e r io d i s m ore
to
e lim in a te

W IT H

T a b l e 3 . — CURRENTEY E ST IM A T E D R E C E IP T S
P R E S I D E N T 'S T AX REDUCTION PROGRAM AND USER FEE
( d o l l a r a m o u n ts i n b i l l i o n s )

PROPOSALS

1981
C u rren t

la w

In d iv id u a l

1982

1983

1984

1985

1986

1 / .........................................

6 0 9 .0

7 0 2 .4

8 0 7 .6

9 1 7 .2

1 0 3 3 .2

1 1 5 9 .8

r e d u c t i o n ................

-6 .4

-4 4 .2

-8 1 .4

-1 1 8 .1

-1 4 1 .5

-1 6 2 .4

r e f o r m .....................................................

-2 .5

-9 .7

-1 8 .6

-3 0 .0

-4 4 .2

-5 9 .3

2 .0

2 .6

3 .0

3 .5

3 .9

r e c e ip ts
in c o m e

D e p r e c ia tio n

ta x

P rop osed

u ser

c h a r g e s ...............................................

R e c e ip ts

w ith

n ew

.........

p o l i c y .........................

6 0 0 .2

6 5 0 .5

7 1 0 .2

7 7 2 .1

8 5 0 .9

9 4 2 .0

S h a r e o f GNP;
C u r r e n t l a w 1 / ................... ........................................
A f t e r t a x r e d u c t i o n p r o g r a m ...................

2 1 .4
2 1 .1

2 2 .0
2 0 .4

2 2 .4
1 9 .7

22 .9
1 9 .3

23 .5
1 9 .3

2 4 .1
1 9 .6

1/
1984,

ta x

I n c l u d e s e x t e n s i o n o f h ig h w a y t r u s t
and
a d d itio n a l
r e c e ip ts
needed

b a s is .




fu n d t a x e s
t o m a in ta in

s c h e d u le d
to
e x p ir e
t h e h ig h w a y t r u s t fu n d

S e p te m b e r 3 0 ,
on an a c c r u a l

CURRENTLY ESTIM ATED BUDGET OUTLOOK
WITH P R E S ID E N T 'S BUDGET SAV IN G S AND TAX REDUCTION PROGRAMS

The
o f f i c i a l b u d g e t e s t i m a t e s r e f l e c t i n g t h e P r e s i d e n t 's t a x an d
b u d g e t s a v in g s p r o p o s a ls w i l l b e fo rw a rd e d t o th e C o n g r e s s
a lo n g
w ith
th e
1982
budget
r e v i s i o n s on M arch 1 0 .
The t a b l e b e lo w ,
h ow ev er, p r o v id e s a p r e lim in a r y e s tim a te o f
th e
ren ew ed
fis c a l
b a la n c e
th a t
can
be
a c h ie v e d
if
th e se
m easu res
are
fu lly
im p le m e n te d .
F ir m a d h e r e n c e t o t h e p r o p o s e d o u t l a y c e i l i n g s w i l l
s t e a d i l y r e d u c e F e d e r a l s p e n d in g a s a s h a r e
of
GNP.
It
w o u ld
a ls o
r e s u lt
in
r a p id
r e d u c tio n o f th e F e d e ra l d e f i c i t and th e
a c h ie v e m e n t o f b a la n c e b y 1 9 8 4 , w ith m o d e st s u r p lu s e s t h e r e a f t e r .
R edu ced F e d e r a l b o r r o w in g p r e s s u r e s on c r e d i t m a r k e ts
w o u ld ,
in
tu rn ,
fa c ilita te
a
s t e a d y r e d u c t i o n i n m oney s u p p ly g r o w th a n d
r e - i n f o r c e t h e a n t i - i n f l a t i o n a r y im p a c t o f s h a r p l y lo w e r s p e n d i n g
g ro w th r a t e s .

NEW P R IO R IT IE S

A c h ie v in g th e P r e s i d e n t 's b u d g e t s a v in g s t a r g e t w i l l r e q u i r e t h a t
th e in d is c r im in a t e p r o l i f e r a t i o n o f
n ew
F ed eral
program s
m u st
co m e
t o an e n d .
The e v e r -w id e n in g r e a c h o f F e d e r a l e c o n o m ic an d
s o c ia l
r e s p o n s ib ilitie s
m u st
be
reversed .
N u m erou s
p o o r ly
c o n c e iv e d o r u n e s s e n t ia l p rogram s i n i t i a t e d d u r in g r e c e n t d e c a d e s
m u st b e e li m i n a t e d o r s e v e r e l y r e d u c e d .

F e d e r a l Ub n L ^ e
s ? 5 a w l, and d is a r r a y t h a t c h a r a c t e r i z e s
F e d e r a l b u d g e t , t h e P r e s i d e n t 's p la n
e s ta b lis h e s
tw o
fir m
o v e r r id in g p r i o r i t i e s :

in a d e S ia te
in a d e q u a te
—

a d e q u a te
5

5

E

T

d e fe n s e
fu n d in g

resou f c? s
to
r e b u ild
c a p a c i t i e s ; and
of

in C lU d i" 9

e s se n tia l

s o c ia l

c° s t -o f -liv in g

! 2 5 t t 2 r * « ? ’S o , ; 2 . S ! T J .

th e

N a t i o n 's

s a fe tv

p ro te «?o n

?«>«

th e
and

L r

net
“

e

Federal.

w id e s p r e a d r e d u c t i o n .
A s i s sh o w n i j
T ab l P 5 ° r ° ?
s c r u t in y and
budget
sa v in q s
n la n
w ill H r S '
,,
5 '
th e
P r e s i d e n t 's
a llo c a tio n s .
By 1 9 8 4 , t h e
d lfe n s p
^
r e “ ° 5 der in t e r n a l b u d g e t
p resen t
24%
s h a r e t ^ 32%
WiH
rise
* ro m
th e
s t i l l l e s s th a n t h e d e fe n s e
a s u b s t a n t ia l e x p a n s io n , b u t

I960-s .
S o c ia l s J fe t y n e ?
b u d g e t s h a r e , d e m o n s tr a tin g
w ill
not
be
fin a n c e d
p rogram s.
ln *n ced
at




e x n fn ^
Share° f
th e
1950's
and
th a t
th e ^ rJ *1 ^ 1S° in c r e a s e t h e i r
r e q u ir e d
d e fe n se
b u ild u p
th e
e x p e n s e o f v i t a l in c o m e s u p p o r t

-8 -

W IT H

T a b l e 4 . — CURRENTLY E ST IM A T E D BUDGET OUTLOOK
P R E S I D E N T 'S BUDGET S A V IN G S AND T A X REDUCTION PROGRAM
( d o l l a r a m o u n ts i n b i l l i o n s )

1981

Share

of

i
VO

I




d e fic it

(-)

or

s u r p l u s ...

1984

1985

1986

6 5 4 .7

6 9 5 .5

7 3 3 .1

7 7 1 .6

8 4 4 .0

9 1 2 .1

6 5 0 .5

7 1 0 .2

7 7 2 .1

8 5 0 .9

9 4 2 .0

-5 4 .5

-4 5 .0

-2 2 .9

+ 0 .5

+ 6 .9

+ 2 9 .9

2 3 .0
2 1 .1

T arget

1983

6 0 0 .2

T a r g e t o u t l a y c e i l i n g s ........................................................
E s tim a te d r e c e i p t s a f t e r ta x r e d u c tio n

1982

2 1 .8
2 0 .4

2 0 .4
1 9 .7

1 9 .3
1 9 .3

1 9 .2
1 9 .3

1 9 .0
1 9 .6

GNP:

T a b l e 5 . — S H I F T IN B U D G E T P R I O R I T I E S U N D E R P R E S I D E N T ' S P L A N
( d o l l a r a m o u n t s in b i l l i o n s )

1962

O u tla y

Shares

$ 1 5 7 .9
2 3 9 .3
6 4 .3
1 9 3 .2

$ 2 4 9 .8
3 1 3 .0
6 6 .8
1 4 2 .0

1 0 6 .8

T o ta l

1984

$ 4 6 .8
2 6 .2
6 .9
2 6 .9

D e p a rtm e n t o f D e f e n s e -M i l i t a r y
S o c ia l s a f e t y n e t p r o g r a m s ....
N e t i n t e r e s t ...................................................
A l l o t h e r .................................... .......................

1981

6 5 4 .7

7 7 1 .6

(P e r c e n t)

D e p a rtm e n t o f D e f e n s e - M i l i t a r y
S o c ia l s a f e t y n e t p r o g r a m s ....
N e t i n t e r e s t ...................................................
A l l o t h e r ............................................................

4 3 .8
2 4 .5
6 .4
2 5 .2

T o ta l

1 0 0 .0 %

2 4 .1
3 6 .6
9 .8
2 9 .5
1 0 0 .0 %

3 2 .4
4 0 .6
8 .6
1 8 .4
1 0 0 .0 %

In
resp on se
to
s h a r p ly
im p ro v e d
e c o n o m ic
and
fin a n c ia l
c o n d itio n s ,
th e
debt
s e r v ic e
sh are
w i l l f a l l so m e w h a t.
As a
c o n se q u e n c e , th e sh a re
a c c o u n te d
fo r
by
a ll
o th e r
p rogram s,
r a n g in g
fr o m s u b s i d i z e d e n e r g y p r o j e c t s , t o c a t e g o r i c a l a i d s f o r
e d u c a t io n , t o s u b s i d i e s f o r b u s i n e s s and a g r i c u l t u r e w i l l
s h r in k
d r a m a tic a lly .




-1 0 -




Shift in Budget Priorities.
(P e r c e n t C o m p o s itio n o f O u tla y s )

1984

BUDGET REFORM C R IT E R IA

The d r a s t i c
fis c a l
re tre n c h m e n t
r e q u ir e d
by
th e
P r e s id e n t’ s
e c o n o m ic p la n w i l l b e a c h i e v e d th r o u g h t h e im p o s i t i o n o f a s e t o f
c le a r ,
c o n s is te n t,
and
e c o n o m ic a lly
sou n d
p o lic y
c r ite r ia .
S p e n d i n g h a s a c h i e v e d r u n a w a y m om entum i n
recen t
years
becau se
such
c r ite r ia
w ere
la r g e ly
absen t
in
b o th th e e x e c u t iv e and
le g is la t iv e bran ch es.
D u r in g t h i s f i s c a l "o p e n
s e a s o n ,"
a lm o s t
no
dem and f o r F e d e r a l a s s i s t a n c e fr o m a n y s e c t o r o f t h e e c o n o m y ,
r e g io n o f t h e N a t i o n , o t h e r u n it o f G o v e rn m e n t, o r t h e n o n - p r o f i t
se c to r
w as
c o n sid e r e d
in v a lid .
As
a
con sequ en ce,
F ederal
p rogram s
to d a y
are
fu n d in g e v e r y t h i n g fr o m w i n d m i ll s t o lu x u r y
h o t e l s , e m p ty p a s s e n g e r t r a i n s , s e w e r c o l l e c t o r l i n e s ,
m u n ic ip a l
p a y r o l l s , an d a w id e v a r i e t y o f e d u c a t i o n a l and s o c i a l s e r v i c e s .
The
in itia l
roun d
of
b u d g et s a v in g s d e t a ile d in t h i s docum ent
c o r r e s p o n d t o t h e n ew c r i t e r i a t h a t t h e P r e s i d e n t h a s e s t a b l i s h e d
fo r e v a lu a tin g c la im s fo r F e d e ra l
su p p o rt.
In
th e
w eeks
and
m o n th s
ahead,
t h e s e c r i t e r i a w i l l be fu r th e r a p p lie d v ig o r o u s ly
t o a l l a r e a s o f t h e b u d g e t in an e f f o r t
to
a c h ie v e
s u b s ta n tia l
fu r th e r e x p e n d itu r e s a v in g s .
T h ese

c r ite r ia

ares

—

p r e s e r v a tio n

—

r e v is e

e n title m e n ts

to

—

red uce

m id d le -u p p e r

in c o m e

—

re co v e r c le a r ly a llo c a b le
g o v e rn m e n ta l r e c e i p t s ) ;

—

a p p ly

—

stre tc h
out
and
re ta rg e t
im p r o v e m e n t p r o g r a m s ;

sou n d

of

th e

c r ite r ia

im p o se f i s c a l
in te r e s t;

s o c ia l

e lim in a te

to

r e s tr a in t

—

c o n s o lid a te
g r a n t s ; and

—

red u ce overh ead
g o v e rn m e n t.

on

n et;
u n in te n d e d

b e n e fits ;

b e n e fits ;
c o sts

fr o m

e c o n o m ic

c a te g o r ic a l

and

s a fe ty

p erson n el

s u b sid y

p u b lic

o th e r

gran t

u sers

(in c r e a s e

in

p rogram s;
se c to r

program s

of

program s

in to

c o sts

th e

of

c a p ita l

n a tio n a l

b lo c k

F ederal

The
d is c u s s io n
b e lo w
o u t l i n e s t h e s e b u d g e t r e fo r m c r i t e r i a and
p r o v i d e s i l l u s t r a t i o n s o f p r o g r a m r e d u c t i o n s r e s u l t i n g fr o m t h e i r
a p p lic a tio n .
F u ll d e t a i ls o f p roposed b u d get p o lic y ch an ges
are
p r o v id e d in th e fo llo w in g s e c t i o n s .




-12-

Preservation of the Social Safety Net
D u r in g
t h e c e n t u r y 's f i r s t g r e a t c r i s i s o f t h e A m e r ic a n e c o n o m y ,
a new s y s t e m o f in c o m e
s e c u r ity
m easu res
w as
e re c te d
in
th e
1 9 3 0 's
to
p ro te ct
th e
e l d e r l y , u n e m p lo y e d , an d p o o r fr o m t h a t
era's
severe
e c o n o m ic
bu rd en s.
D u r in g
th e
su bseq u en t
fo u r
d ecad es,
t h e s e p ro g ra m s w e re m a in t a in e d and im p r o v e d , and b eca m e
t h e c o r e o f t h e N a t i o n 's
p erm an en t
s o c ia l
s a fe ty
n et.
T h ese
e sse n tia l
c o m m itm e n ts
n ow
tra n sc e n d
d iffe r e n c e s
o f id e o lo g y ,
p a r t is a n s h ip , and f i s c a l p r i o r i t i e s .
T h u s , a s we s e e k t o r e s o l v e t h e s e c o n d g r e a t e c o n o m ic
c r is is
th is
cen tu ry ,
in
part
th ro u g h
severe
bu d get r e d u c tio n s ,
P r e s id e n t b e lie v e s th a t th e e s s e n t i a l s o c i a l s a fe t y n e t
m u st
m a in ta in e d .
In d eed ,
th e
P r e s i d e n t 's
budget
r e fo r m
p la n
a n im a te d b y and m u st b e u n d e r s to o d in te r m s o f i t s m o t i v a t i o n
p reserve
and
r e p r e se n t th e
o v e r th e p a s t

m a in ta in
th o se
a c c ru e d perm an en t
fiv e d ecad es.

of
th e
be
is
to

s o c ia l
s a fe ty
n e t p rogram s t h a t
c o n s e n s u s o f t h e A m e r ic a n
p e o p le

N ot
every
p r o g r a m d e f e n d e d i n t h e nam e o f t h e d i s a d v a n t a g e d c a n
o r s h o u ld b e c o n s id e r e d p a r t o f t h e e s s e n t i a l s o c i a l s a f e t y
n et.
B u t t h e P r e s i d e n t h a s d e t e r m i n e d t h a t , a t a m in im u m , t h e p r o g r a m s
d e s c r ib e d
in
T a b le 6
m e r it
th e h ig h e s t p r i o r i t y .
O n ly m o d e s t
r e v i s i o n s a r e p r o p o s e d f o r t h e s e p r o g r a m s , w it h s a v i n g s a m o u n tin g
to one p e r c e n t o f 1982 o u tla y l e v e l s .
As th e t a b le in d ic a t e s ,
th e
d o lla r
c o m m itm e n t
to
th e se
core
s o c ia l
sa fe ty
net
program s w i l l be s u b s t a n t ia l o v e r th e n e x t 5
years.
Any
s ig n ific a n t
re tre a t
fr o m
p rop osed
r e d u c tio n s
e ls e w h e r e i n t h e b u d g e t w i l l p o s e a t h r e a t t o t h e N a t i o n 's f i s c a l
c a p a c i t y t o m a in t a in t h e a b o v e c o m m itm e n ts .
In
a d d i t i o n t o t h e c o r e co m p o n e n ts o f t h e s o c i a l s a f e t y n e t , t h e
P r e s id e n t h a s d e te r m in e d t h a t c e r t a i n
o th e r
im p o r ta n t
program s
can
n ow
be
m a in ta in e d a t p r e s e n t l e v e l s .
T h u s , th e H ead S t a r t
p ro g ra m , s e r v in g 3 7 5 ,0 0 0 c h ild r e n a t an a n n u a l c o s t o f o v e r
$800
m illio n ;
th e
su m m e r
y o u t h e m p l o y m e n t p r o g r a m , p r o v i d i n g su m m e r
jo b s t o 8 0 0 ,0 0 0 t o 9 0 0 ,0 0 0 lo w -in c o m e y o u t h s a t an a n n u a l c o s t o f
a b o u t $ 8 0 0 m i l l i o n ; and s u b s id iz e d s c h o o l n u t r i t io n p rogram s
fo r
lo w -in c o m e
c h ild r e n
and
p rogram s
to
p r o v id e
m e a ls
fo r
th e
e l d e r l y , w ith an a n n u a l c o s t o f $ 2 .1
b illio n
can
p r e s e n tly
be
sp ared
of a ll

th e
o th e r

sh arp re d u c tio n s
p rogram s.

th a t

have

n e c e s s a r ily

been

r e q u ir e d

The a b o v e d i s c u s s i o n m akes c l e a r t h a t th e d o l l a r r e q u ir e m e n ts
to
m a in ta in
th e
s o c ia l
s a fe ty
net
are
and
w i l l c o n tin u e t o be
s u b s ta n tia l.
H ard c h o i c e s and d i f f i c u l t t r a d e o f f s h a v e n o t
been
a v o id e d
b y th e P r e s id e n t in d e v i s in g t h e b u d g e t r e fo r m p la n .
In
d e fe n d in g and s e e k in g t o m a in ta in th e s o c i a l s a f e t y n e t , h o w e v e r,
th e P r e sid e n t h a s a r t ic u la t e d a se n se o f p r i o r i t i e s th a t i s
b o th
c le a r and w id e ly s h a r e d .




-13-

Table 6.— SOCIAL SAFETY NET PROGRAMS
( d o l l a r a m o u n t s in b i l l i o n s )
1981

1 982

184.0
20.3

209.2
17.2

15.1
20.0

n e t . . . . ................

S o c ia l s a fe ty n et as p e rc e n t "ta r g e t
o u t l a y c e i l i n g " ..............................................................................

S o c ia l in s u r a n c e b e n e f i t s fo r th e e ld e r ly .
B a s i c u n e m p l o y m e n t b e n e f i t s ............................................
C ash b e n e f i t s f o r d e p e n d e n t f a m i l i e s ,
e l d e r l y , a n d d i s a b l e d ............................................................
S o c i a l o b l i g a t i o n t o v e t e r a n s . . . .............................
O u tla y s




fo r

s o c ia l

s a fe ty

1984

1985

1986

233.1
15.2

256.3
15.2

280.4
14.7

305.1
14.4

15.4
22.1

16.7
23.9

16.0
25.5

17.3
27.4

17.9
28.8

239.3

263.9

288.8

313 . 0

339.9

366.1

36.6

37.9

39.4

40.6

40.3

40.1

1983-

Revise Entitlements

to Eliminate Un in t e n d e d Benefits

The
N a t i o n 's
s o c ia l
s a fe ty
net
c o n s is ts
p r im a r ily
of
le g is la tiv e ly
e s t a b lis h e d e n t it le m e n t s t o fix e d s o c i a l in s u r a n c e
o r m e a n s -te s te d b e n e f i t s .
W h ile
p o sin g
s e r io u s
p r o b le m s
fo r
s h o r t -r u n
fis c a l
m a n a g e m e n t,
su ch
e n title m e n ts
are
th e o n ly
p r a c t i c a l w ay t o e n s u r e r e l i a b l e a n d r e g u l a r p a y m e n t o f
b e n e fits
t o m i l l i o n s o f A m e r ic a n c i t i z e n s .
D u r in g
th e
la s t
20
years,
h ow ever,
th e F e d e ra l e n t itle m e n ts
s t r u c t u r e a n d r e l a t e d in c o m e
s e c u r ity
program s
have
e x h ib ite d
r a p id ,
n e a r ly
u n in te r r u p te d
real
g ro w th .
T o t a l p a y m e n ts f o r
in d iv id u a ls in c r e a s e d a t a r a te n e a r ly
d o u b le
th a t
of
o v e r a ll
b u d g e t g ro w th and 2♦ 5 t im e s f a s t e r th a n GNP.
M o reov er, th e sh are
of
to ta l
b u d g e t o u t l a y s a c c o u n te d f o r b y t h e s e b e n e f i t p a y m e n ts
ro se d r a m a tic a lly .

T a b le

7 . — GROWTH OF EN TITLE M EN T AND INCOME S E C U R IT Y
( d o l l a r ' a m o u n ts i n b i l l i o n s )

C u rren t
D o lla r s

1972
D o lla r s
3 4 .1
4 4 .4
7 1 .9
1 2 4 .4
1 5 3 .3

1 9 6 0 ...................................... ..
1 9 6 5 ...................................... ..
1 9 7 0 ........................................
1 9 7 5 ........................................
1 9 8 1 ...................................... ..

PAYMENTS

S hare o f
F e d e ra l B udget
2 6 .0 %
2 8 .4
33 .6
4 8 .0
5 0 .3

M u ch o f t h i s g r o w t h r e p r e s e n t s i n c r e a s e d c o v e r a g e o f
w ork ers
in
th e
s o c ia l
s e c u r ity
sy ste m
and r e a l b e n e f i t in c r e a s e s .
But a
s u b s t a n t ia l p r o p o r tio n i s due t o th e
c r e a tio n
of
num erou s
n ew
e n title m e n ts
and
b e n e fits
s in c e
1970
or
m a jo r
e x p a n s io n o f
e a r lie r p rogram s.
A s i s sh ow n
in
th e
fo llo w in g
ta b le ,
th e se
new er
in c o m e
s e c u r ity
p ro g ra m s h a v e e x h i b i t e d e x p l o s i v e g ro w th
p a tte rn s —
in c r e a s in g t e n fo ld in a s in g le d e c a d e .




-15-

T a b le

8 . — OUTLAYS FOR R E L A T IV E L Y NEW OR EXPANDED
FEDERAL A S S IS T A N C E PROGRAMS
(in m illio n s o f d o lla r s )

1970

F o o d s t a m p s ..................................................................................................................
B l a c k l u n g ( c o a l m i n e r b e n e f i t s ) ..................................................
E x t e n d e d u n e m p l o y m e n t b e n e f i t s ........................................................
W IC ( f o o d s u p p l e m e n t s ) ................................................................................
L o w - i n c o m e e n e r g y a s s i s t a n c e ..............................................................
S u p p l e m e n t a l s e c u r i t y i n c o m e ..............................................................
H o u s i n g a s s i s t a n c e .............................................................................................
T r a d e a d j u s t m e n t a s s i s t a n c e .................................................................
S c h o o l n u t r i t i o n ...................................................................................................
S o c i a l s e c u r i t y d i s a b i l i t y ....................................................................
T o t a l ......................................................................................................................

*

P red ecessor

1981

577
10
........
........
........
1 ,8 1 2 *
480
3
383
2 , 352

1 0 ,9 5 0
1 ,7 1 8
4 ,0 9 4
904
1 ,8 9 6
7 ,3 0 5
6 ,8 6 1
2 ,7 4 3
3 ,4 8 5
16, 978

5 ,6 1 7

5 6 ,9 3 4

p rogram s.

T he g r o w th p a t t e r n s o f t h e p a s t tw o
decades
have
s te m m e d
fro m
m u ltip le
sou rces.
A t t i m e s , p rogra m s w ere d e v e lo p e d in r e s p o n s e
t o n ew p e r c e p t i o n s o f n e e d ;
at
o th e r
tim e s
to
n ew
ty p e s
of
p r o b le m s .
The
s u b s ta n tia l
e x p a n s io n
of
th e
fo o d a s s i s t a n c e
p rogram s in th e e a r ly 1 9 7 0 's in r e s p o n s e t o e v id e n c e o f
n a tio n a l
hunger
and
m a ln u tr itio n
is
an
e x a m p le
of
th e
fo r m e r ;
th e
lo w -in c o m e e n e r g y a s s i s t a n c e p a y m e n ts r e f l e c t t h e l a t t e r .
O th e r

sources

o f

g ro w th

have

in c lu d e d :

—

E x p a n s io n o r l i b e r a l i z a t i o n o f s o c i a l in s u r a n c e c o v e r a g e
a s re p re se n te d
by
th e
near
d o u b lin g
o f
th e
s o c ia l
s e c u r ity
d is a b ility
c a s e lo a d
s in c e
1970
and
th e $2
b illio n
cost
of
s o c ia l
s e c u r ity
stu d e n t
p a y m e n ts,
c r e a te d in 1 9 6 5 .

—

S t a t u t o r y , a d m i n i s t r a t i o n , and
ju d ic ia l
lib e r a liz a tio n
of
e lig ib ility
c r i t e r i a f o r m e a n s -te s te d p ro g ra m s.
In
m any c a s e s , t h e t r u e m e a s u r e o f in c o m e f o r
p u rp oses
of
e s ta b lis h in g
e l i g i b i l i t y i s b a d ly d i s t o r t e d .
T here h as
been
a
ste a d y
e x p a n s io n
o f
d e d u c tio n s
to
in c o m e ,
in c lu d in g
s h e lte r
a llo w a n c e s ,
c h ild c a re c o s t s , w ork r e la t e d e x p e n s e s , m e d ic a l and v a r io u s ty p e s o f ir r e g u la r
in c o m e .
The "p y r a m id in g " o f t h e s e d e d u c t io n s f r e q u e n t ly
c r e a t e s a w id e g a p b e tw e e n a
r e a s o n a b le
m easu re
o f
a
r e c i p i e n t ' s g r o s s in c o m e a n d " c o u n t a b l e " in c o m e u s e d f o r
b e n e fit
d e te r m in a tio n .
T h ese
p r a c tic e s
expand
th e
e l i g i b i l i t y b a s e , e s c a l a t e p ro g ra m c o s t s , and r e s u l t
in
unneeded b e n e f i t s .




-1 6

—

F a ilu r e
to
in te g r a te
m u ltip le
b e n e fits ,
e s p e c ia lly
in -k in d
tr a n s fe r s .
M any
h o u s e h o ld s t h a t b e n e f i t fr o m
fo o d s t a m p s , f o r e x a m p le , r e c e i v e m e d ic a id , f r e e
sch ool
lu n c h e s
and
b r e a k fa sts,
h o u s in g
s u b s id ie s ,
and lo w in c o m e
en ergy
a s s is ta n c e
p a y m e n ts.
Y et
o n ly
cash
t r a n s f e r s , su c h a s AFDC, a r e c o u n te d in d e t e r m in in g fo o d
sta m p a l l o t m e n t s .

—

S u b s id y p a y m e n ts and r e im b u r s e m e n t sc h e m e s
fo r
in -k in d
b e n e f i t s su ch a s s u b s id iz e d h o u s in g , m e d ic a l a s s i s t a n c e ,
and
c h ild
care
s e r v ic e s
encou rage
e x p a n s io n
o f th e
q u a n tity o r c o s t o f s e r v ic e s to th e lim it
of
a v a ila b le
F ederal
d o lla r s ,
w ith o u t r e g a r d f o r th e m ost e f f i c i e n t
p r o v is io n o f b e n e fit s .
T h u s, s e c t i o n 8 h o u s in g r e q u ir e s
$ 2 ,2 3 6 p e r u n it in a n n u a l s u b s i d i e s ,
m e d ic a id
s e r v ic e s
a r e f r e q u e n t ly o v e r - u t i l i z e d , and s t a n d a r d s and s t a f f i n g
r a t io s fo r day c a re c e n te r s h av e in c r e a s e d s t e a d i ly .

T h ese
c o n s id e r a tio n s
and u n s u s t a in a b le g ro w th t r e n d s c o n t a in an
u n m is ta k a b le l e s s o n :
o u r s o c i e t y 's
c o m m itm e n t
to
an
a d e q u a te
s o c ia l
sa fe ty
net
c o n ta in s
p o w e r fu l,
in h e r e n t ly e x p a n s io n a r y
te n d e n c ie s .
I f l e f t unchecked, th e se
fo r c e s
th re a te n
e v e n tu a l
fis c a l
r u in
and
s e r io u s
c h a lle n g e s
to b a s ic s o c ia l v a lu e s o f
in d e p e n d e n c e
and
s e lf-s u p p o r t.
The
F ederal
G overnm en t
has
c re a te d
s o m any e n t i t l e m e n t s f o r u n n e c e s s a r y b e n e f i t s t h a t i t i s
e s s e n t i a l t o b e g i n p a r i n g th e m b a c k .
P r o p o s a ls fo r r e fo r m :
T he P r e s i d e n t 's b u d g e t r e fo r m
th is
lo n g
overdu e
e ffo r t.
F o r 1 9 8 2 , m ore th a n $ 9
b u d g e t s a v i n g s ca n b e a c h ie v e d b y an i n i t i a l s e t
of
r e v is io n
p r o p o s a ls .
T h e se s a v in g s w i l l grow t o $ 1 6
1985.
F u r th e r p r o p o s a ls w i l l b e d e v e lo p e d b y th e
A
i n t h e m o n th s a h e a d .

p la n
b e g in s
.0 b i l l i o n
in
e n title m e n t
.0 b i l l i o n b y
d m in is tr a tio n

In a l l c a s e s , t h e s e recom m ended c h a n g e s a r e d e s ig n e d t o e l i m i n a t e
excesses,
o v e r la p s ,
and u n in te n d e d b e n e f i t s t h a t h a v e d e v e lo p e d
d u r in g th e r e c e n t p e r io d o f u n b r id le d e x p a n s io n .
I f app roved
by
th e
C on gress,
th e se
r e fo r m s w i l l r e fo c u s b e n e f i t s on th e t r u l y
n e e d y and r e t a r g e t p ro g ra m s on
th e ir
in te n d e d
p u rp oses.
They
w ill
b r in g
th e c o s t and c o v e r a g e o f th e F e d e r a l e n t it le m e n t and
in c o m e s u p p o r t s y s t e m b a c k
in to
c o n fo r m ity
w ith
th e
N a tio n ' s
e s s e n t i a l s o c i a l s a f e t y n e t c o m m itm e n ts .
T h u s,
p r o p o s a l s t o l i m i t fo o d sta m p e l i g i b i l i t y t o f a m i l i e s w it h
g r o s s in c o m e s b e lo w 130% o f p o v e r t y an d t o
e m p lo y
r e tr o s p e c tiv e
in c o m e
a c c o u n tin g
w ill
h e lp r e tu r n th e p rogram t o i t s o r i g i n a l
g o a l:
e n s u r in g a d e q u a te n u t r i t io n
le v e ls
fo r
a ll
h o u s e h o ld s .
U nder
cu rren t
r u le s
and
p r a c tic e ,
t h e fo o d sta m p p r o g r a m h a s
b e c o m e , in f a c t , an i n d i r e c t t r a n s f e r p a y m en t
program
fo r
m any
p e o p le n o t t r u l y in n eed —
a p o lic y e f f e c t n ev e r in te n d e d .
S im ila r ly ,
t h e e x t e n d e d n a t i o n a l u n e m p lo y m e n t b e n e f i t f e a t u r e o f
u n e m p lo y m e n t i n s u r a n c e w a s
in te n d e d
to
p r o v id e
e x tra
su p p ort
d u r in g
p e r io d s
o f s e v e r e c y c l i c a l u n e m p lo y m e n t.
But ch an ges in
th e
la b o r
fo r c e
and
th e
in c r e a s in g ly
uneven
g e o g r a p h ic
d is tr ib u tio n
o f
u n e m p lo y m e n t h a v e m ade o b s o l e t e t h e n o t i o n t h a t
th e se

b e n e fits




s h o u ld

be

tr ig g e r e d

-1 7 -

by

th e

n a tio n a l

u n e m p lo y m e n t

ra te .
The
p rop osed
s h i f t t o S t a t e t r i g g e r s a t m o d e s tly h ig h e r
th r e s h o ld l e v e l s w i l l r e d ir e c t e x te n d e d b e n e f i t s t o
areas
w h ere
th e y
are
needed
w h ile
re m o v in g
in c e n tiv e s
fo r
p r o lo n g in g
u n e m p lo y m e n t b e n e f i t s i n g r o w t h a r e a s o f
th e
N a tio n
w h ere
jo b
o p p o r tu n itie s a re a v a ila b le .
The
p rop osed
r e fo r m s
o f t h e b la c k lu n g p ro g ra m f o r c o a l m in e r s
c o n ta in a
s im ila r
o b je c tiv e :
to
r e fo c u s
b e n e fits
on
th o se
d is a b le d
by
b la c k
lu n g ;
to
c u r ta il
te n d e n c ie s t o expand th e
p rogram i n t o w h at y o u ld , in e f f e c t , b e a s p e c i a l p e n s io n
p rogram
fo r
m in e r s ;
and t o a s s u r e t h a t th e c o a l in d u s t r y b e a r s th e c o s t
o f d i s a b i l i t i e s c a u s e d b y w ork i n
th e
m in e s .
The
P r e s i d e n t 's
p la n
a ls o
seeks
to
c u r ta il
s h a r p ly
th e
tra d e
a d ju s tm e n t
a s s is ta n c e
p rogram ,
w h ic h
has
now
becom e
a
secon d ary
and
o v e r l a p p i n g u n e m p lo y m e n t i n s u r a n c e p r o g r a m , a d e v e l o p m e n t c l e a r l y
in c o m p a tib le

w ith

its

o r ig in a l

in te n t.

The
P r e s i d e n t 's b u d g e t r e fo r m p la n a l s o c a l l s f o r e l i m i n a t i o n o f
tw o s e c o n d a r y s o c i a l i n s u r a n c e b e n e f i t s ~
th e
s o c ia l
s e c u r ity
stu d e n t
and
s p e c ia l
m in im u m b e n e f i t s — b e c a u s e m o r e e f f i c i e n t
m e a n s - t e s t e d b e n e f i t p r o g r a m s a r e n ow a v a i l a b l e t o s u p p o r t
needy
r e c ip ie n ts .
T h ese
changes
w ill
sa v e a n e t o f $ 2 .6 b i l l i o n b y
1 9 8 4 an d w i l l m o d e s t ly im p r o v e
th e
a c tu a r ia l
b a la n c e s
of
th e
t r u s t fu n d .
F i n a l l y , t h e s e i n i t i a l r e fo r m p r o p o s a ls s e e k t o l i m i t t h e ru naw ay
g ro w th
of
tw o o f t h e m a jo r i n - k i n d b e n e f i t p r o g r a m s — m e d i c a i d
and lo w e r -in c o m e r e n t a l ( s e c t i o n 8 ) h o u s in g a s s i s t a n c e —
th ro u g h
in te r im s t a b i l i z a t i o n
m easu res.
T h ese
m easu res
w ill
produ ce
budget
sa v in g s
o f $ 4 .3 b i l l i o n p e r y e a r b y 1 9 8 4 and p e r m it tim e
t o d e v e lo p a lt e r n a t i v e a p p ro a ch e s t h a t a v o id
th e
in h e r e n t
cost
and
s e r v ic e
e s c a l a t i o n and b e n e f i t o v e r l a p s b u i l t i n t o e x i s t i n g
p rogram s.
Taken t o g e t h e r ,
th e se
in itia l
r e fo r m s
c o n s titu te
a
c a r e fu l,
d is c r im in a tin g ,
and e q u i t a b l e e f f o r t t o r e s t r u c t u r e t h e N a t i o n 's
overgrow n
e n title m e n t
sy ste m .
They
a ls o
d e m o n stra te
th a t
a c h ie v in g
fis c a l
c o n t r o l and m a in t a in in g t h e N a t i o n 's e s s e n t i a l
s o c i a l s a f e t y n e t a r e c o m p a tib le o b j e c t i v e s .

R educe

M id d le

to

U pper

In c o m e

B e n e fits

G iv e n t h e n e e d t o s h a r p ly
reduce
F ederal
s p e n d in g
r e s u ltin g
in fla t io n a r y p r e s s u r e s , s u b s id ie s to th o se
t o u p p e r in c o m e s r e p r e s e n t an o b v io u s f o c a l p o i n t f o r
r e fo r m p la n .

g ro w th
and
w it h m id d le
th e
budget

The
sh arp
s u b s id y r e d u c t io n s p r o p o s e d b y t h e p la n a r e , h o w e v e r ,
c l e a r l y b a l a n c e d b y t h e P r e s i d e n t ’ s c o m m it m e n t t o l o w e r t a x r a t e s
and b u d g e t b a la n c e .
No
grou p s
are
m ore
a c u te ly
a ffe c te d
by
in fla tio n ,
h ig h
t a x l e v e l s , and b r a c k e t c r e e p th a n th e N a t i o n ’ s
m i d d le in c o m e t a x p a y e r s ;
a c c o r d in g ly ,
th e
P r e s i d e n t 's
o v e r a ll
p rogram
w ill,
in
som e
cases,
im m e d ia te ly and s h o u ld , in m o st
c a s e s , r a p id ly co m p en sa te
fo r
any
d is lo c a tio n s
o c c a sio n e d
by
p rogram s u b s id y r e d u c t io n s .




-1 8 -

T h e r e i s y e t a n o t h e r a s p e c t t o t h e m i d d l e t o u p p e r in c o m e s u b s i d y
r e d u c tio n s
and
e li m i n a t i o n s p r o p o s e d b y th e b u d g e t re fo r m p la n .
O nce e n a c t e d b y t h e C o n g r e s s ,
th e
p la n
w ill
arrest
w hat
has
h e r e to fo r e
been
an
u n fo r tu n a te
n a tio n a l
d r ift
to w a rd
th e
u n iv e r s a liz a tio n o f s o c ia l b e n e fit s .
E x te n s io n o f s o c i a l
sa fe ty
net
program s
d e s ig n e d
fo r
th e
poor
to
a ll
c itiz e n s
is
a
p r e s c r i p t i o n f o r i n f l a t i o n , h i g h t a x e s , lo w g r o w t h , a n d f e d e r a l l y
im p o se d
m a n d a tes.
H ence,
th e
s p e c ific
p r o p o s a ls
in
th e
P r e s i d e n t 's
r e fo r m
p la n
d e a lin g
w ith
m id d le
t o u p p e r in c o m e
s u b s i d i e s s h o u l d , w hen a d o p t e d , a r r e s t d i v i s i v e d e b a t e o v e r
su ch
m a n ife s tly
u n s u s ta in a b le
program s a s n a t io n a l h e a lth in s u r a n c e ,
m i d d l e in c o m e
h o u s in g
s u b s id ie s ,
u n iv e r s a l
c o lle g e
a id ,
and
s im ila r i n i t i a t i v e s .
An
e x a m in a tio n
s u b s id y p rogram s
d e m o n stra te s th e

of
th e
tw o
p r in c ip a l
m id d le
t o upper
t h a t th e P r e s i d e n t 's
p la n
p rop oses
to
c l e a r n eed f o r im m e d ia te a c t i o n .

in c o m e
r e fo r m

U nneeded
lu n c h
s u b s id ie s :
U nder th e P r e s i d e n t 's p la n , f a m i l i e s
o f f o u r w i t h a n n u a l i n c o m e s a b o v e $ 1 5 , 6 3 0 m ay b e r e q u i r e d t o
pay
an e x t r a $ 6 0 m ore p e r c h i l d p e r y e a r f o r s c h o o l l u n c h e s .
It is a
m easu re
of
th e
ex ten t
to
w h ic h
m id d le
to
upper
in c o m e
s u b s i d i z a t i o n h a s o c c u r r e d in th e F e d e r a l b u d g e t t h a t a d o p tio n o f
th e P r e s i d e n t ' s p la n r e g a r d in g th e s c h o o l n u t r i t i o n program
w ill
a lo n e
g e n e r a t e m ore th a n $2 b i l l i o n i n s a v i n g s a n n u a lly b y 1 9 8 6 .
M o r e o v e r , a d e q u a t e f u n d i n g w o u ld r e m a i n t o
su p p ort
fr e e
sch ool
l u n c h e s f o r 1 0 m i l l i o n p o o r c h i l d r e n , 3 m i l l i o n o f whom w i l l a l s o
c o n tin u e t o r e c e iv e f r e e s c h o o l b r e a k f a s t s .
S tu d en t lo a n s :
A n o th e r b r o a d a r e a o f s u b s id y r e d u c t io n t o m id d le
and
upper
in c o m e f a m i l i e s t h a t i s p r o p o s e d b y t h e b u d g e t r e f o r m
p la n d e a ls w ith s tu d e n t lo a n s
and
g ra n ts.
The
p la n
p rop oses
s ig n ific a n t
changes
(d e s ig n e d
to
ta rg e t
b e n e fits
on
a ctu a l
s tu d e n t f i n a n c i a l n e e d s) in
b o th
th e
g u a ra n te e d
stu d e n t
lo a n
(G S L )
and
P e ll
gran t
program s,
at
s a v i n g s o f m o re t h a n $ 9 . 2
b i l l i o n fr o m 1 9 8 1 - 8 6 .
I n t h e c o n t i n u i n g b u d g e t r e v i e w now t a k i n g
u p p e r in c o m e b e n e f i t p r o g r a m s s i m i l a r
to
p rop oses
to
r e d u c e and e li m i n a t e w i l l b e
r e d u c t i o n and e l i m i n a t i o n .

R ecover A llo c a b le

C o sts

w ith

U ser

p l a c e , o t h e r m id d le t o
th o se
th a t
th e
p la n
c o n s id e r e d fo r s im ila r

F ees

M o st G overn m en t p ro g ra m s a r e d e s ig n e d t o b e n e f i t th e N a t io n a s
a
w h o le ,
or
p r o v id e
s p e c ia l
a s s is ta n c e
to
needy o r v u ln e r a b le
grou p s.
Some
a c tiv itie s ,
how ever,
p r o v id e
d ir e c t
e c o n o m ic
b e n e fits
to
a
s p e c ific
and
know n
grou p
of
in d iv id u a ls
or
e n te r p r is e s .
W h ile i t i s o f t e n n e c e s s a r y o r d e s i r a b l e f o r
th e se
a c tiv itie s
to
be
c o n d u cted
by
th e
F e d e r a l G o v e rn m e n t, i t i s
c le a r ly in e q u ita b le fo r th e g e n e r a l ta x p a y e r to b e a r
th e
bu rden
of
s e r v ic e s
th a t
p r o v id e
s p e c ia l b e n e fit s fo r s p e c if ic u s e r s .
The b u d g e t r e fo r m p la n p r o v id e s f o r s h i f t i n g
th e
cost
of
so m e
s u c h a c t i v i t i e s t o t h o s e who d i r e c t l y b e n e f i t .




-19-

The
P r e s id e n t
i s p r o p o s in g u s e r f e e s t o e lim in a t e th e s u b s i d i e s
on in la n d w a te r w a y s,
recover
h a lf
of
th e
C oast
G u a rd
co sts
d ir e c tly
a s s o c ia te d
w ith a c t i v i t i e s t h a t b e n e f i t u s e r s o f b o a t s
and y a c h t s , and f u l l y f i n a n c e t h e a i r t r a f f i c c o n t r o l
sy ste m
by
r e in s ta tin g
and
a d e q u a t e ly fu n d in g t h e a i r p o r t and a ir w a y t r u s t
fu n d .
A d d it io n a l p r o p o s a ls
w ill
be
d e v e lo p e d
to
a p p ly
th is
p r i n c i p l e o n a m ore e x t e n s i v e s c a l e .
E lim in a tin g
s u b s id ie s
f o r a i r p o r t and a ir w a y u s e r s :
The a c t u a l
u s e r s o f t h e a v i a t i o n s y s te m — c o m m e r c ia l and
gen eral
a v ia tio n
— r e c e iv e m ost o f i t s b e n e f i t s .
N ot r e q u ir in g u s e r s t o b e a r th e
f u l l c o s t o f t h e i r a c t i v i t i e s p r o v id e s an u n w a rra n te d s u b s i d y and
en cou rages
u n e c o n o m ic u s e o f t h e s y s t e m .
P assen ger t ic k e t ta x e s
and g e n e r a l a v i a t i o n f u e l t a x e s s u f f i c i e n t t o f i n a n c e t h e
e n tir e
cost
of
th e a i r t r a f f i c c o n t r o l sy ste m w i l l be p ro p o se d in l i e u
o f a g e n e r a l reven u e s u b s id y .
( T h is s u b s i d y w as $ 1 . 9 b i l l i o n
in
1 9 8 0 .)
B o a t an d y a c h t u s e r f e e s :
C o a s t G u a rd o p e r a t i n g e x p e n s e s i n 1 9 8 2
w ill
e x c e e d $ 1 .3 b i l l i o n .
A s u b s ta n t ia l p o r tio n o f i t s s e r v ic e s
—
in c lu d in g
lic e n s in g ,
in s p e c tio n ,
vessel
d o c u m e n ta tio n ,
o p e r a tio n
of
a id s
t o n a v i g a t i o n , r e s c u e and to w in g a s s i s t a n c e ,
i c e b r e a k i n g , and w a t e r p o l l u t i o n m o n it o r in g and
c le a n u p
—
are
p r o v id e d w ith o u t c h a r g e .
Y e t th e y b e n e f i t a s m a ll segm en t o f th e
p u b lic
—
som e 9 m i l l i o n i n d i v i d u a l s a n d f i r m s .
To re m e d y t h i s
u n n ecessary
su b s id y ,
le g is la tio n
w ill
be
s u b m itte d
fo r
a
g r a d u a t e d s y s t e m o f f e e s f o r C o a s t G u a rd s e r v i c e s t o b e p h a s e d i n
over
th e
next
4
years.
About h a l f o f th e c o s t s , e x c e p t th o s e
r e l a t e d t o la w
e n fo r c e m e n t
and
m ilita r y
r e a d in e s s ,
w o u ld
be
in c lu d e d .
As
is
th e
c a s e w i t h many F e d e r a l a c t i v i t i e s f o r w h ic h f e e s a r e
a lr e a d y c o l l e c t e d ( e . g . , u se o f p a rk cam p grou n d s, c a t t l e
g r a z in g
on
F ederal
la n d s ),
boat
and
yacht
ow n ers
and
t h e m a r itim e
in d u s t r y w i l l be c h a r g e d r e l a t i v e l y s m a ll f e e s in r e l a t i o n t o th e
v a lu e o f b e n e f i t s th e y r e c e i v e .
E lim i n a t e i n la n d w a te rw a y
s u b s id ie s :
The
A d m in is tr a tio n
w ill
seek
to
e li m i n a t e t h e s u b s id y on in la n d w a te r w a y s, b e g in n in g in
1 9 8 3 , by in c r e a s in g ta x e s fo r barge f u e l .
The F e d e r a l G overn m en t
now s p e n d s o v e r $ 3 2 5 m i l l i o n p e r y e a r
to
o p e ra te
and
m a in ta in
in la n d
w a te r w a y s f o r c o m m e r c ia l t r a f f i c t h a t u n t i l t h i s y e a r h a s
p a id no t a x o r f e e f o r s y s te m
u se.
T h is
year
a
new
ta x
of
4 c e n ts
per
g a llo n
on
b arge
f u e l w i l l r e p a y o n l y 11% o f t h a t
c o st.
U n d e r t h i s p r o p o s a l , f u e l t a x e s w i l l i n c r e a s e fr o m 6 c e n t s
p e r g a llo n t o a b o u t 30 c e n ts p er g a llo n in 1 9 8 3 .
T h is w i l l c o v e r
t h e f u l l am ou n t t h a t t h e G overn m en t s p e n d s on t h e
o p e r a tio n
and
m a in te n a n c e
o f th e w a te rw a y s.
I t i s e s tim a te d th a t th e in c r e a s e
in c o s t t o s h ip p e r s w i l l b e l e s s th a n
0 .4 c e n ts
per
to n
m ile .
T here
w i l l b e fu tu r e ta x in c r e a s e s t o pay fo r in c r e a s e d e x p e n se s
on e x i s t i n g w a t e r w a y s a n d t o p a y f o r t h e c o n s t r u c t i o n , o p e r a t i o n ,
a n d m a i n t e n a n c e o f new w a t e r w a y s .




-20-

Apply Sound Criteria to Economic Subsidy Programs
The p a s t d e c a d e o f d e t e r i o r a t i n g
n a tio n a l
e c o n o m ic
p e r fo r m a n c e
has
been
a c c o m p a n ie d
b y a r a p id b u i l d - u p o f F e d e r a l g r a n t s and
o th e r
su b s id ie s
d e s ig n e d
to
a lle v ia te
th e
e ffe c ts
of
th a t
d e t e r i o r a t i o n on s p e c i f i c s e g m e n ts o f t h e p o p u l a t i o n and e co n o m y .
F ederal
p r o g r a m s h a v e t h u s b e e n c r e a t e d a n d e x p a n d e d i n t h e name
o f s t i m u l a t i n g g r o w t h , j o b s , e x p o r t s , a n d new
te c h n o lo g ie s ;
and
to
a s s is t
d e c lin in g
in d u s tr ie s
and f i r m s and i n o t h e r w ays t o
a lte r
and
fin e -tu n e
th e
le v e l
and
c o m p o s itio n
of
n a tio n a l
e c o n o m ic a c t i v i t y .
M any
of
th e se
program s,
h ow ever,
have
se rv e d t o d i s t o r t th e
m a rk e t econ om y and
have
th ereb y
c o n tr ib u te d
as
much
to
th e
p r o b le m s
th e y
w ere
in te n d e d
to
add ress as to th e ir s o lu tio n .
S u c h s u b s i d y p o l i c y c o m m itm e n ts h a v e l a r g e l y r e s u l t e d fr o m o v e r l y
p e r m i s s i v e f i s c a l p o l i c i e s , fr o m
an
absen ce
of
hard
e c o n o m ic
a n a ly s is ,
and
fr o m
fa ilu r e
to
u se li m i t e d ta x r e s o u r c e s on a
c o s t -e ffe c t iv e b a s is .
The P r e s i d e n t 's b u d g e t and c o m p r e h e n s iv e e c o n o m ic
p la n
app roach
th e
real
p r o b le m s
a s s o c ia te d
w ith
d e te r io r a tin g
e c o n o m ic
p e r f o r m a n c e fr o m a f u n d a m e n t a l l y d i f f e r e n t p r e m i s e :
th a t
so u n d
b u d g e t c o n t r o l , t a x r e d u c t i o n , r e g u l a t o r y r e fo r m , and a p p r o p r ia t e
m o n e ta ry
p o lic ie s
rep resen t
th e
o n ly
real
hope fo r renew ed,
n o n - i n f l a t i o n a r y g r o w th and p r o s p e r i t y .
A c c o r d i n g l y , th e P r e s i d e n t 's p la n c o n t e m p la t e s s e v e r e
r e d u c tio n s
i n m a k e -w o r k j o b p r o g r a m s , g o v e r n m e n t a l p r o g r a m s t o s t i m u l a t e new
en ergy
te c h n o lo g ie s ,
and
r e g io n a l
and
c o m m u n ity
d e v e lo p m e n t
s u b s id ie s , as w e ll as a h o s t o f o th e r
m is d ir e c te d
s p e n d in g
and
s u b s id y p ro g ra m s.
I n t h e c o n t e x t o f a h e a l t h y e x p a n d in g e c o n o m y ,
s ta b le
fin a n c ia l
m a rk e ts
and a r e v i v a l o f s a v i n g s , in v e s t m e n t ,
and e n t r e p e n e u r s h ip , n o rm a l m a rk e t f o r c e s w i l l b e r e l i e d upon
to
a c h ie v e
p resen t
program
g o a ls .
T h u s,
b y w ay o f e x a m p l e , t h e
ste a d y
r e d u c tio n
of
in te r e s t
ra te s
and
e lim in a t io n
of
in fla tio n a r y
cost
pressu res
fr o m
t h e n a t i o n a l econom y w i l l do
m o re t o s t i m u l a t e e x p o r t s a n d i n t e r n a t i o n a l c o m p e t i t i v e n e s s
th a n
c u r r e n t E x p o r t - I m p o r t B ank s u b s i d i e s t o a s e l e c t e d g r o u p o f l a r g e
c o r p o r a tio n s .
S im ila r ly ,
th e
budget
r e fo r m
p la n c o n te m p la te s r e d i r e c t i o n o f
b e l o w - m a r k e t l o a n s b y t h e F a r m e r s Home A d m i n i s t r a t i o n t o t h e v e r y
poor
and
to
th o se
of
th e
N a t i o n 's
s m a lle s t
and
p oorest
c o m m u n itie s
th a t
tr u ly
la c k
a c c e s s t o f in a n c ia l m a rk e ts.
The
b u d g e t r e fo r m p la n a l s o s h a r p ly r e s t r i c t s h i g h ly s u b s id iz e d R u ra l
E l e c t r i f i c a t i o n A d m i n i s t r a t i o n (R E A ) l o a n s
fo r
p o w e r -g e n e r a tin g
and
te le p h o n e
s y s t e m i m p r o v e m e n t s , a s w e l l a s REA a c c e s s t o t h e
F e d e r a l F in a n c in g B an k.
On t h e g r o u n d s t h a t p r e s e n t d a i r y s u b s i d i e s a r e n e e d l e s s l y l a r g e ,
th e
budget
r e fo r m
p la n
p rop oses
im m e d ia te
e lim in a t io n
of
m a n d a to ry
d a ir y
p r ic e
su p p ort
i n c r e a s e c u r r e n t ly s c h e d u le d t o
t a k e e f f e c t on A p r i l 1 , 1 9 8 1 .
L o n g -te r m
r e fo r m s
a ffe c tin g
th e
d a ir y
in d u str y
w ill
be
ad d ressed
in
th e
A d m i n i s t r a t i o n 's
c o m p r e h e n s iv e fa r m
program ,
w h ic h
w ill
be
s u b m itte d
to
th e
C o n g r e ss d u r in g th e c u r r e n t l e g i s l a t i v e s e s s i o n .




-21-

Many o b s o l e t e o r
in h e r e n tly
in e ffic ie n t
F ederal
s u b s id ie s
to
s p e c ific
se cto rs
of
th e
e co n o m y w i l l a l s o b e e l i m i n a t e d .
For
e x a m p le i p a s s e n g e r f a r e s o n A m t r a k 's r o u t e s c o v e r o n l y a b o u t
40%
of
to ta l
o p e r a tin g c o s t s , th e r e b y r e q u ir in g u n j u s t i f i a b ly la r g e
s u b s id ie s .
I f th e c u r r e n t r o u te s tr u c tu r e i s t o
be
m a in ta in e d ,
A m tra k
p assen gers
or
S ta te
and
lo c a l
g o v e r n m e n ts m u st p a y a
g r e a te r p r o p o r tio n o f th e t o t a l o p e r a tin g c o s t s .
The b u d g e t r e fo r m p la n a l s o p r o p o s e s o t h e r s i g n i f i c a n t r e d u c t i o n s
in F e d e ra l a c t i v i t y th a t i s n e ith e r j u s t i f i e d
by
c o s t -e ffe c t iv e
u se
of
ta x
resou rces
nor
by
t h e P r e s i d e n t ' s c o m m itm e n t t o a
m a rk e t— i r e c t e d p o l i c y .
d
A c c o r d in g ly ,
th e
budget
re fo r m
p la n
p rop oses
th e
p h a s e -o u t o f o p e r a tin g s u b s id ie s fo r l o c a l t r a n s i t
s y s t e m s , C o n r a i l , c e r t a i n l o c a l a i r l i n e s e r v i c e s , and t h e
P o sta l
S e r v ic e .

S tr e tc h -O u t
P rogram s

and

R e -T a r g e t

P u b lic

S e c to r

C a p ita l

In v estm e n t

T he
F ederal
G overn m ent
has
u n d e rta k en
a
nu m ber o f d e s i r a b l e
p u b lic
se cto r
c a p ita l
in v e s tm e n t
p rogram s.
U nder
norm al
c o n d itio n s
of
lo w
in fla t io n
and
stro n g
e c o n o m ic g r o w t h , t h e
c u r r e n t r a t e o f m any o f
th e se
a c tiv itie s
w o u ld
be
ju s tifie d .
H ow ever,
g iv e n
th e
i n s t a b i l i t y o f t h e U .S . econom y, th e b u d g e t
r e fo r m p la n r e q u i r e s t h a t in t h e s h o r t ru n t h e s e
in v e s tm e n ts
be
stre tch e d
out
or
d e la y e d .
The
im m e d ia te n e e d t o im p r o v e t h e
h e a l t h o f t h e e c o n o m y a s a w h o le o v e r r i d e s t h e
m e r its
of
r a p id
c o m p le tio n
of
su ch
p r o je c ts
in d iv id u a lly .
S p e c i f i c p r o p o s a ls
in c lu d e w a te r
resou rce
p r o je c ts ,
w a ste
tr e a tm e n t
fa c ilitie s ,
h ig h w a y s , m ass t r a n s i t , and a i r p o r t s .
W a te r
resou rce p r o je c ts :
T h e A d m i n i s t r a t i o n w i l l p r o p o s e a n 11%
r e d u c t i o n in th e p la n n e d c o n s t r u c t i o n p ro g ra m
of
th e
C orp s
of
E n g in e e r s ,
C iv il;
W a te r
and
P ow er R e s o u r c e s S e r v i c e ; a n d S o i l
C o n se r v a tio n S e r v ic e .
T h is r e d u c t io n w i l l d e f e r o n ly
som e
le s s
c r i t i c a l p a r t s o f p r o j e c t s , su c h a s t h e d e v e lo p m e n t o f r e c r e a t i o n
areas
and
som e
ru ral
flo o d
c o n tro l
and
ir r ig a tio n
w a te r
d is t r ib u t io n sy ste m s.
The s t r e t c h -o u t o f a b o u t 70
of
th e
m o re
th a n
300
p r o je c ts
u n d e rw a y w i l l r e d u c e F e d e r a l e x p e n d i t u r e s b y
$ 1 .6 b i l l i o n o v e r th e n e x t 5 y e a r s .
W a ste
tr e a tm e n t
g ra n ts:
T he
a p p lic a tio n
of
th e
d e fe r r a l
p r in c ip le
to
th e
m u n ic ip a l
w a ste tr e a tm e n t g r a n t program w i l l
re d u ce n e a r -te r m o u t la y s f o r c a p i t a l in v e s tm e n ts b y $ 0 .1
b illio n
in
1982,
$ 1 .0
b illio n
in
1 9 8 3 , and $ 2 .0 b i l l i o n i n 1 9 8 6 .
In
a d d i t i o n , m a jo r r e fo r m s w i l l b e p r o p o s e d t h a t
w ill
r e lie v e
th e
b u rden
on
th e
F ederal
G overn m ent
fo r fin a n c in g p r o je c t s th a t
im p r o v e t h e e n v ir o n m e n t o n l y m a r g i n a l l y o r n o t a t a l l .
H ig h w a y
c o n s tr u c tio n
g ra n ts:
The
A d m i n i s t r a t i o n 's
h ig h w a y
program
prop osal
w ill
in v o lv e
s t r e t c h i n g o u t a n d s l o w i n g dow n
c o n s tr u c tio n
of
lo w e r
p r io r ity
h ig h w a y
p r o je c ts .
B o th
th e
p r im a r y
sy ste m
and
t h e I n t e r s t a t e h ig h w a y s y s te m i n p a r t i c u l a r
w i l l , h ow ever, c o n tin u e
to
r e c e iv e
a
h ig h
le v e l
of
F ederal
fu n d in g .
Som e l o w e r p r i o r i t y I n t e r s t a t e h i g h w a y p r o j e c t s w i l l b e
e lim in a t e d
to
a llo w
f i n a l c o m p le tio n o f th e sy ste m b y th e 1 9 9 0




-22-

s ta tu to r y d e a d lin e .
The p r o p o s e d c h a n g e s i n
program
w ill
produce
budget
sa v in g s
of
b i l l i o n by 1 9 8 6 .

th e F e d e r a l
h ig h w a y
a p p r o x im a te ly
$ 1 2 .6

M a ss t r a n s i t c a p i t a l g r a n t s :
T he r e d u c e d fu n d in g l e v e l s f o r m ass
t r a n s i t c a p it a l g r a n ts a re p r im a r ily
a c h ie v e d
by
r e d u c in g
th e
am ount
of
fu n d s
fo r
c o n s t r u c t i n g new r a i l t r a n s i t s y s t e m s a n d
e x te n d in g e x i s t i n g s y s te m s .
G r a n t s t o p u r c h a s e b u s e s and
u p d a te
e x is tin g
r a il
sy ste m s
—
p a r tic u la r ly
in la r g e , c o n c e n tr a te d
urban a r e a s — w i l l be c o n tin u e d .
The c o n s t r u c t i o n o f
new
r a il
tr a n s it
sy ste m s
o r e x te n s io n s h as n o t p ro v e d , how ever, to be as
c o s t -e ffe c t iv e as o th e r, le s s c a p ita l
in te n s iv e
p r o je c ts .
The
fiv e
r a i l s y s t e m c o n s t r u c t i o n p r o j e c t s now u n d e r w a y t h a t r e c e i v e
F e d e r a l a s s i s t a n c e (W a s h in g t o n , M ia m i,
B u ffa lo ,
B a ltim o r e ,
an d
A tla n ta )
r e q u ir e
a p p r o x im a te ly
$75
m illio n
per
m ile
fo r
c o n s t r u c t i o n and e q u ip m e n t.
R e d u c tio n
of
a ir p o r t
c o n s tr u c tio n
gran t
program :
The
A d m in is tr a tio n
w ill
p rop ose
le g is la tio n
to
red u ce th e an n u al
fu n d in g a v a i l a b l e f o r a i r p o r t c o n s t r u c t i o n
g ra n ts
d u r in g
19811986 by 33% .
T h e n e e d t o e x p a n d a i r p o r t c a p a c i t y i s no l o n g e r s o
c r itic a l
a s i t w a s w hen a v i a t i o n t r a f f i c i n c r e a s e d s i g n i f i c a n t l y
o n a n a n n u a l b a s i s a n d t h e d e v e l o p m e n t o f new
a ir c r a ft
r e q u ir e d
w id e r and lo n g e r r u n w a y s.
The e f f e c t s on a v i a t i o n s a f e t y w i l l b e
n e g lig ib le
s i n c e a l m o s t no a v i a t i o n a c c i d e n t s a r e r e l a t e d t o t h e
p h y s ic a l fe a tu r e s o f a ir p o r t s .

Im p ose

F is c a l

R e s tr a in t

on O th e r

P rogram s

of

N a tio n a l

In te re st

In norm al c ir c u m s t a n c e s , th e F e d e r a l b u d g e t
can
carry
program s
th a t
are
in
th e
n a tio n a l
in te r e s t
b u t c a n n o t b e a c c o r d e d an
urgen t p r io r it y .
F o r e x a m p le , w h ile no o n e
can
deny
th a t
our
l i v e s a r e m ade r i c h e r b y m u se u m s, t h e a r t s , a n d h u m a n i t i e s , i t i s
a ls o
tru e
th a t
th e y
c a n n o t c l a i m t h e sam e u r g e n c y o r p r i o r i t y
t h a t m u st b e a s s i g n e d t o p rog ram s p r o v i d in g th e t r u l y n e e d y
w ith
th e
fu n d a m e n ta ls
of life .
In t im e s su c h a s t h e s e , th e a r t s and
h u m a n it ie s m u st p l a c e g r e a t e r r e l i a n c e on
th e
r o le
of
p r iv a te
p h i l a n t h r o p y and S t a t e and l o c a l s u p p o r t .
The b u d g e t r e fo r m p la n
w o u ld r e d u c e s u p p o r t f o r t h e a r t s a n d h u m a n i t i e s e n d o w m e n ts t o a n
o u t l a y l e v e l o f a p p r o x im a te ly - $ 1 0 0 m i l l i o n .
The
m e r it
of
research
and
d e v e lo p m e n t
is
w ith o u t q u e s t io n .
H ow ever,
in
tim e s
of
fis c a l
a u s te r ity
even
som e
p r o m is in g
in v e s tm e n ts
i n s c i e n c e a n d t e c h n o l o g y m u s t b e r e s t r a i n e d a n d new
u n d e r ta k in g s p o s tp o n e d .
T h u s , t h e p r e v i o u s l y p la n n e d g r o w th i n o u t l a y s f o r
th e
N a tio n a l
S c ie n c e
F o u n d a tio n
a n d NASA w i l l b e m o d e r a t e l y r e d u c e d .
In th e
l a t t e r c a s e , tr im m in g b a c k lo w e r p r i o r i t y p ro g ra m s w i l l e n a b le us
to proceed
w ith
th e
Space
S h u ttle
program
and
to
c o n tin u e
e s s e n tia l
R&D
program s
in
areas
of
sp a ce
s c ie n c e ,
space
a p p l i c a t i o n s , and a e r o n a u t i c s .
The N a t io n a l I n s t i t u t e s o f H e a lth w i l l r e c e i v e
m o d e ra te
fu n d in g
in c r e a se s
th a t
are
d e s ig n e d
to
a llo w
th e
c o n tin u a tio n
of
e s s e n t i a l b io m e d ic a l r e s e a r c h ; h ow ever,
th e
in c r e a s e s
w ill
be




-23-

in s u ffic ie n t
t o fu n d
overhead
fe e s
p a id
tr a in e e s .

n o n -u r g e n t a c t i v i t i e s
to
in s titu tio n s
fo r

su ch a s e x t r a o r d in a r y
fe d e r a lly
su p p o rted

F i n a l l y , beyon d th e s e program s t h a t c l e a r l y h ave m e r it , t h e r e a r e
a
num ber
of
o t h e r s w h ose fu n d a m e n ta l m e r it i s d e b a t a b l e .
S u ch
p rog ram s m u st b e s e v e r e l y c u t b a c k o r e v e n e l i m i n a t e d .
A
broad
v a r ie ty
of
a d d it io n a l F e d e r a l program s h ave b een th e s u b je c t o f
in t e n s e d e b a te a s t o t h e i r u n d e r ly in g
m e r it.
E ven
r e c o g n iz in g
th e v ie w s o f th e in h e r e n t w o rth o f su ch p ro g ra m s t h a t a r e o f f e r e d
by
t h e i r p r o p o n e n t s , c o n t i n u e d s u p p o r t f o r th e m c a n n o l o n g e r b e
ju s tifie d
under
th e
P r e s i d e n t 's
budget
r e fo r m
p la n
—
th e
o p e r a tin g
p r e m is e
of
w h ic h i s t h a t F e d e r a l s u p p o r t m u s t now b e
r e s tr ic te d
to
program s
of
fu n d a m e n ta l
n a tio n a l
p r io r ity .
A c c o r d in g ly ,
th e
p la n
c a lls
fo r
te r m in a tio n
o f th e N a tio n a l
C o n su m er
C o o p e r a tiv e
Bank,
th e
S o la r
E n ergy
and
E nergy
C o n s e r v a tio n
Bank,
an d t h e HUD p l a n n i n g a s s i s t a n c e p r o g r a m .
It
fu rth e r c a l l s
fo r
a
r a p id
p h a s in g
out
of
th e
P r o fe s s io n a l
S ta n d a rd s
R e v ie w O r g a n i z a t i o n (PSRO) p r o g r a m , a n d t h e c l o s u r e o f
th e e i g h t r e m a in in g P u b li c H e a lth S e r v i c e h o s p i t a l s .
F u r th e r , p rogram s t h a t do n o t m eet s t r i n g e n t
p r io r ity
te sts
of
th e
P r e s i d e n t 's
budget
r e fo rm
p la n
w ill
be
c o n s id e r e d
fo r
r e d u c tio n
and
te r m in a tio n
in
th e
c o n tin u in g
budget
r e v ie w
process.

C o n s o lid a te

C a te g o r ic a l

G ra n t P rogram s

in to

B lo c k

G ra n ts

T here
is
a
g r o w in g
c o n s e n s u s am ong S t a t e a n d l o c a l g o v e r n m e n t
o f f i c i a l s t h a t a s m any
narrow
c a te g o r ic a l
g ra n ts
as
p o s s ib le
s h o u ld
be
c o n s o l i d a t e d i n t o a fe w b l o c k g r a n t s , p a r t i c u l a r l y i f
F e d e r a l fu n d in g m u st b e re d u ce d in t h e e f f o r t t o c u rb i n f l a t i o n .

T h e w i d e l y a c k n o w le d g e d b e n e f i t s o f b l o c k g r a n t s
are
th a t
th e y
a llo w
th e
r e d u c tio n
o f o v e rh e a d b e c a u s e t h e r e a r e fe w e r p e o p le
p r o c e s s i n g p a p e r s , and t h a t th e y p e r m it S t a t e and l o c a l o f f i c i a l s
t o a l l o c a t e fu n d s t o t h e m o st u r g e n t
areas
of
need.
T h u s,
a
b lo c k
gran t
p r o g r a m f u n d e d a t a l o w e r l e v e l c a n p r o v i d e a s m any
b e n e f i t s f o r t h e S t a t e and l o c a l r e c i p i e n t s a s a h i g h e r l e v e l
of
fu n d in g f o r a m u l t i p l i c i t y o f n a rro w c a t e g o r i c a l g r a n t s .
In
c o n ju n c tio n
w ith
th is
requ est
fo r
th e
c o n v e r s io n
of
c a t e g o r ic a l g r a n ts t o b lo c k g r a n t s ,
S ta te
and
lo c a l
o ffic ia ls
asked
th a t
fe d e r a lly
m a n d a te d
cost
r e q u ir e m e n ts
—
w h ic h
M a y o r K och o f New Y o r k h a s c a l l e d " t h e m a n d a te m i l l s t o n e " —
and
o th e r
r e g u la tio n s
be
r e la x e d ,
a g a in
so
th a t redu ced F e d e r a l
d o lla r s
c o u ld
have
th e
sam e
im p a c t
on
real
n eed s.
The
e lim in a tio n
of
u n n ecessary
r e g u la tio n s
is
a
k e y p a r t o f th e
re fo r m p l a n .
In W a s h in g to n , th e o b j e c t i o n m ost o f t e n r a i s e d t o b lo c k g r a n t s i s
t h a t th e F e d e r a l G overn m ent w i l l l o s e c o n t r o l o v e r t h e
e ffe c tiv e
u s e o f t h e t a x p a y e r 's d o l l a r s .
But th e p o in t i s t h a t th e F e d e r a l
G overn m en t
u n n e c e s s a r ily
c o n tr o ls
d e ta ile d
S ta te
and
lo c a l
p r io r itie s .
S t a t e s and l o c a l i t i e s a r e
not
a lie n
o r g a n iz a tio n s




-24-

in im ic a b le
to
th e b e s t in t e r e s t o f th e c it i z e n s th e y r e p r e s e n t.
T hey c o n s i s t o f t h o s e l e g i s l a t o r s and e x e c u t i v e s
who
cope
w ith
th e
real
p r o b le m s
of
th e
c i t i z e n s th e y s e r v e .
P e o p le a t th e
S t a t e a n d l o c a l l e v e l s h o u l d b e m a k in g d e c i s i o n s w i t h r e s p e c t
to
th e
s o c ia l
and
c o m m u n ity
s e r v ic e s
t h a t a re r e q u ir e d in t h e i r
lo c a litie s .
I t may t u r n o u t t h a t
one
ju r is d ic tio n
needs
m o re
m o n ey f o r c h i l d w e l f a r e s e r v i c e s t h a n f o r l e g a l s e r v i c e s .
O ne
le s s o n
is
c le a r
fr o m
th e
p a st:
th e o n ly r e a l l o s e r in
c o n v e r tin g
c a te g o r ic a l
g ra n ts
to
a
b lo c k
gran t
are
th e
b u r e a u c r a tic
m id d le m e n
— t h e g r a n t s m e n — who u s e up f u n d s f o r
th e n eedy.
M any o f t h e r o u g h l y 5 5 0 c a t e g o r i c a l
g ra n ts
program s
s h o u ld b e c o n v e r t e d t o b lo c k g r a n t s .
A t t h i s tim e , th e P r e s id e n t
is
p r o p o s in g
tw o m a jo r b l o c k g r a n t s :
o n e f o r h e a l t h and s o c i a l
s e r v i c e s and t h e o t h e r f o r e d u c a t io n .
H e a lth and s o c i a l
s e r v ic e s :
The
p resen t
array
of
about
40
c a te g o r ic a l
g ra n ts
fo r
h e a lt h and s o c i a l s e r v i c e s m o s t ly s e r v e
n arrow
p o p u la tio n
grou p s
d e fin e d
by
v a r io u s
in c o m e ,
h e a lth
sta tu s,
age,
r e s id e n c e ,
and
jo b
c a te g o r ie s .
O ver th e y e a r s ,
t h e s e p ro g ra m s h a v e becom e e n s n a r e d i n
a
s ta g g e r in g
degree
of
w a ste ,
c o m p le x ity ,
and
b u r e a u c r a tic
overhead.
The
program s
p r o p o s e d f o r c o n s i d e r a t i o n e n c o m p a ss 4 3 7 p a g e s o f la w
and
1 ,2 0 0
pages
of
r e g u la tio n .
T h ese program s a d m in is te r 6 ,8 0 0 s e p a r a te
g r a n t s and a p p r o x im a te ly 2 4 ,0 0 0 g r a n t
s ite s .
O nce
aw ards
are
m ade,
o v e r 7 m i l l i o n man h o u r s o f S t a t e a n d l o c a l g o v e r n m e n t a n d
c o m m u n ity e f f o r t a r e u s e d j u s t i n f i l l i n g o u t f e d e r a l l y
r e q u ir e d
re p o rts
each
year.
In a d d i t i o n , th e N a tio n s u p p o r ts o v e r 3 ,3 0 0
F e d e r a l e m p lo y e e s t o a d m i n i s t e r t h e g r a n t p ro g ra m s
p rop osed
fo r
c o n s o lid a tio n .
The
needy
o fte n
m u st
go
to
several
d iffe r e n t
a g e n c ie s fo r
d i f f e r e n t s e r v i c e s a n d d i f f e r e n t f a m i l y m em b e rs may r e c e i v e
care
fr o m
d iffe r e n t
p r o v id e r s .
F o llo w -u p and c o n t i n u i t y o f c a r e a r e
n e g le c te d .
M oreover, th e re has been a p r o life r a t io n o f
se p a ra te
r e g u la tio n s ,
o u t -r e a c h
and
lin k a g e
r e q u ir e m e n ts ,
gran t
a p p l i c a t i o n and r e v ie w p r o c e s s e s , and a u d i t /r e c o r d
r e q u ir e m e n ts .
T h is p r o l i f e r a t i o n h a s c r e a t e d b a r r i e r s t o e f f e c t i v e c o o r d in a t io n
am ong
S ta te s,
c o m m u n itie s ,
and o t h e r i n s t i t u t i o n s t h a t p r o v id e
s e r v ic e s .
U n n ecessary overhead exp en ses have r e s u lt e d .
F in a lly ,
m any o f
th e se
program s
are
very
s m a ll,
th o u g h
a ll
r e q u ir e
e x te n s iv e r e g u la t io n s .
The
P r e s i d e n t 's
b lo c k
g r a n t p r o p o s a l a d d r e s s e s t h e s e p r o b le m s .
I t i s in te n d e d t o e n a b le S t a t e s t o p la n and c o o r d in a t e t h e i r
own
s e r v ic e
program ,
e s ta b lis h
th e ir
own p r i o r i t i e s , a n d e x e r c i s e
e f f e c t i v e c o n t r o l o v e r th e r e s o u r c e s p r o v id e d t o
lo c a litie s
and
n o n p r o fit
o r g a n iz a tio n s .
T h is a p p ro a ch re d u c e s th e m u l t i p l i c i t y
o f r u le s and r e g u l a t i o n s — h e n c e ,
F ederal
d ir e c tio n
—
under
w h ic h
s e r v ic e
a g e n c ie s
m u st
c u r r e n tly
o p e ra te .
F u rth e rm o re ,
o v e r l a p p i n g f u n d i n g f r o m d i f f e r e n t p r o g r a m s f o r t h e sam e s e r v i c e s
c o u ld b e e li m i n a t e d .
E d u c a tio n :
The D e p a r tm e n t
of
E d u c a tio n
c u r r e n tly
a d m in is te r s
over
45 narrow c a t e g o r i c a l g r a n t program s t h a t p r o v id e r e s o u r c e s
t o S t a t e and l o c a l g o v e rn m e n ts
to
su p p ort
a
w id e
v a r ie ty
of
e d u c a tio n a l
o b je c tiv e s .
The P r e s id e n t i s p r o p o s in g t o c o l l a p s e




-25-

t h e s e p r o g r a m s i n t o tw o p r o g r a m s — o n e b l o c k g r a n t t o
and t h e o t h e r t o l o c a l e d u c a t i o n a l a g e n c i e s ( L E A 's ) .

th e

S ta te s

T h ese b lo c k g r a n ts w i l l s h i f t c o n t r o l o v e r e d u c a tio n p o li c y
aw ay
fr o m
th e
F ederal
G overn m en t
and
back
to
S ta te
and
lo c a l
a u th o r itie s
—
w h ere
it
c o n s titu tio n a lly
and
h is to r ic a lly
b e lo n g s .
The F e d e r a l r o l e i s t o s u p p ly n e c e s s a r y r e s o u r c e s , n o t
t o s p e c i f y in e x c r u c i a t i n g d e t a i l w h at m u st b e
done
w ith
th e se
resou rces.
U nder
th e se
b lo c k
g ra n ts,
th e re
w ill
b e no r e q u ir e m e n ts f o r
m a t c h in g f u n d s a n d n o
d em an ds
th a t
F ederal
fu n d s
"s u p p le m e n t
ra th e r
th a n
s u p p la n t"
lo c a l fu n d in g .
T h e re w i l l b e no e n d le s s
b y z a n t i n e s q u a b b l e s o v e r m y r ia d a c c o u n t i n g r e g u l a t i o n s
th a t
a id
b u rea u cra ts,
not
c h ild r e n .
A p p r o x im a te ly
13%
o f th e F e d e r a l
fu n d s
in
program s
to
be
c o n s o lid a te d
are
now
used
fo r
a d m in is tr a tiv e
exp en ses
by
S ta te
and
lo c a l
a g e n c ie s .
T h is
overhead w i l l be
d r a s tic a lly
redu ced
under
th e
c o n s o lid a tio n
p r o p o s a l.
The
LEA
b lo c k
gran t
in c lu d e s
program s t h a t a re p r e s e n t ly fo r
stu d e n ts
ju d g e d
to
have
s p e c ia l
e d u c a tio n a l
n eed s:
th e
e c o n o m ic a lly
d is a d v a n ta g e d ,
th e
p h y s ic a lly
or
m e n ta lly
h a n d ic a p p e d ,
c h ild r e n
w ith
lim ite d
p r o fic ie n c y
in
E n g lis h ,
c h i l d r e n i n s c h o o l d i s t r i c t s u n d e r g o in g r a c i a l d e s e g r e g a t i o n , and
illite r a te
a d u lts .
The
gran t
t o t h e S t a t e s c o m b in e s p r o g r a m s
th a t (a ) p r o v id e d i r e c t
e d u c a tio n a l
s e r v ic e s
fo r
h a n d ic a p p e d ,
n e g le c te d ,
and d e l i n q u e n t c h i l d r e n ; ( b ) im p r o v e t h e s t a f f i n g and
s e r v ic e s o f
th e
S ta te
e d u c a tio n a l
a g e n c ie s ;
and
(c ) su p p ort
im p r o v e d
sch ool
s e r v ic e s
in
a
v a r ie ty
of
w ays,
in c lu d in g
a ss is ta n c e
to
sch ool
lib r a r ie s ,
c u r r ic u lu m
d e v e lo p m e n t,
and
p r o v id e
te c h n ic a l
a s s is ta n c e .
B ecau se
m any o f t h e s e p r o g r a m s
o v e r la p s e r v i c e s
to
d is a d v a n ta g e d
stu d e n ts,
th e
b lo c k
gran t
sy ste m
w ill
a llo w
lo c a litie s
to
e lim in a t e
c o n flic tin g
and
d u p l i c a t i v e r e g u l a t i o n s and r e p o r t i n g r e q u i r e m e n t s .
B u d g e t a u t h o r i t y f o r t h e b l o c k g r a n t s i n 1 9 8 2 w i l l b e 80% o f
th e
sum
of
th e
c o m b in e d
program s
in
1981.
The
A d m in is tr a tio n
a n t i c i p a t e s t h a t th e re d u ce d fu n d in g l e v e l s
w ill
be
o ffse t
by
m o re
e f f i c i e n t m anagem ent g e n e r a t i n g fr o m t h e i n c r e a s e d l a t i t u d e
g i v e n t o S t a t e and l o c a l g o v e r n m e n ts t o t a i l o r e d u c a t i o n p r o g r a m s
t o s u i t th e p a r t i c u la r needs o f c h ild r e n in t h e i r d i s t r i c t s .
I n su m m a ry , t h e c r e a t i o n o f t h e s e tw o
b lo c k
g ra n ts
w ill
be
a
m a jo r
c o n tr ib u to r
to
th e b u d g e t r e fo r m p la n .
M o re b l o c k g r a n t
p r o p o s a l s w i l l b e m ade t o t h e C o n g r e s s b y t h i s A d m i n i s t r a t i o n .

R educe F e d e r a l O v e r h e a d ,
and I n e f f i c i e n c y

P erson n el

C o sts,

and

P rogram W a s te

F e d e r a l G overn m en t a c t i v i t y i s r a r e l y s u b je c t e d t o
th e
te st
of
th e m a r k e tp la c e .
As a r e s u l t , th e r e h a s b een a te n d e n c y t o b u i ld
up
overhead,
p e r s o n n e l,
and r e g u l a t o r y c o s t s w i t h o u t r e g a r d t o
th e m easu rem en t o f b e n e f i t s .
The b u d g e t r e fo r m p la n p r o v id e s f o r
r e d u c tio n s in th e s e a r e a s .
I t w ill
a ls o
s y s te m a tic a lly
red u ce




-26

r e g u la to r y
in te r v e n tio n
in
p r iv a te
se cto r
p r o m o te e c o n o m ic e f f i c i e n c y and o u t p u t .
T h is p r o c e s s i s a lr e a d y
c o m p le te
fre e z e
on
procurem ent
of
o ffic e
G overn m ent t r a v e l .

a c tiv itie s

so

as

to

u n derw ay.
The
P r e s id e n t
has
p la c e d
a
F ederal
h ir in g
and
ordered
lim its
on
e q u ip m e n t,
c o n s u ltin g
s e r v ic e s ,
an d

For
1982
and
beyond,
every
asp ect
o f F e d e r a l m a n a g e m e n t an d
a d m i n i s t r a t i v e p r a c t i c e w i l l b e e v a l u a t e d and
tig h te n e d .
As
a
su ccessor
to
th e p r e s e n t h ir in g fr e e z e p o li c y , th e P r e s id e n t i s
p r o p o s in g a 5 -y e a r p la n t o s t e a d i l y
redu ce
F ederal
e m p lo y m e n t .
By
1986,
F ederal
p a y r o lls
w o u ld d e c l i n e b y 7% a t a s a v i n g s o f
$ 1 .5 t o $ 3 .9 b i l l i o n a n n u a lly and c u r r e n t p a y l e v e l s .
V ig o r o u s ,
sy s te m a tic
p la n s
to
e lim in a te
program
w a s te and fr a u d and t o
sp eed F e d e r a l d e b t c o l l e c t i o n a re a ls o
under
d e v e lo p m e n t.
The
P r e s id e n t
w ill
a ls o
prop ose
m a jo r
re fo r m
o f th e F e d e r a l pay
c o m p a r a b ilit y sy ste m in
order
to
b r in g
s a la r y
s c h e d u le s
and
annual
a d ju s tm e n t
c o sts
in to
lin e
w ith a c t u a l p r iv a t e s e c t o r
le v e ls .
F in a lly ,
th e
s u b s ta n tia l
a d d itio n a l
resou rces
r e q u ir e d
fo r
d e fe n s e
r e a d in e s s
and
s t r e n g t h e n in g s t r a t e g i c and c o n v e n t io n a l
c a p a b i l i t i e s w i l l n o t e x e m p t t h e D e f e n s e D e p a r t m e n t fr o m r i g o r o u s
r e q u ir e m e n ts t o e li m i n a t e w a s t e f u l p r a c t i c e s and
p rogram s.
The
P r e s i d e n t 's
b u d g e t r e fo r m p la n c a l l s f o r $ 2 .9 b i l l i o n in d e fe n s e
cost
s a v in g s
in
1982,
r is in g
to
$ 7 .5
b illio n
by
1986.
P ro cu re m en t r e fo r m , r e a lig n m e n t o f th e d o m e s tic b a s in g s t r u c t u r e ,
and fu t u r e y e a r p e r s o n n e l r e d u c t io n s w i l l a l l c o n t r i b u t e t o t h e s e
s a v in g s .




-27-

INDEX OF PROGRAM PROPOSALS BY BUDGET REFORM CRITERIA

Page
1.

REVISE ENTITLEMENTS TO ELIMINATE UNINTENDED BENEFITS

D e p a r tm e n t o f A g r i c u l t u r e
F o od s t a m p s ..................................................................................................................................

1 -1

D e p a r t m e n t o f H e a l t h a n d Human S e r v i c e s
S o c ia l s e c u r ity b e n e f it s :
M inim um b e n e f i t s ...........................................................................................................
A d u l t s t u d e n t b e n e f i t s ..........................................................................................
D i s a b i l i t y i n s u r a n c e ................................................................................................
AFDC w e l f a r e p r o g r a m s .....................................................................................................
M e d i c a i d ...........................................................................................................................................

1 -5
1 -7
1 -9
1 -1 1
1 -1 5

D e p a r t m e n t o f H o u s i n g a n d U rb a n D e v e lo p m e n t
S u b s i d i z e d h o u s i n g l e v e l s .......................................................................................... ..1 - 1 7
S u b s i d i z e d h o u s i n g r e n t s ...............................................................................................1 - 1 9
P u b l i c h o u s i n g m o d e r n i z a t i o n ................................................................................. ..1 - 2 1
D ep a rtm e n t o f L a b o r
U n e m p lo y m e n t i n s u r a n c e :
E x t e n d e d b e n e f i t s ....................................................................................... . ................ 1 - 2 2
W ork t e s t ............................................................................................................................... .. 1 - 2 4
F e d e r a l e m p l o y e e s i n j u r y c o m p e n s a t i o n ( F E C A ) ................................... .. 1 - 2 6
U n e m p lo y m e n t c o m p e n s a t i o n f o r e x - s e r v i c e m e m b e r s ............................. 1 - 2 8
T r a d e a d j u s t m e n t a s s i s t a n c e .................................................................................... .. 1 - 3 0
B l a c k l u n g .......................... .......................................................................................................... .. 1 - 3 3
O th e r A g e n c ie s
F ederal c iv ilia n

i n d e x a t i o n ...........................

1 -3 5

D ep a rtm e n t o f A g r i c u l t u r e
C h i l d n u t r i t i o n .......................................................................................................................

2 -1

D ep a rtm e n t o f E d u c a tio n
S t u d e n t a s s i s t a n c e ..............................................................................................................

2 -3

O th e r A g e n c ie s
S a l l i e Mae ( g u a r a n t e e d

2 -5

2.

r e tir e m e n t:

Annual

REDUCE MIDDLE-UPPER INCOME BENEFITS




stu d e n t

lo a n s

-28-

—

o f f - b u d g e t ) ...............

3.

RECOVER CLEARLY ALLOCABLE COSTS FROM USERS
GOVERNMENTAL R ECEIPTS)

(INCR EASE

IN

D ep a rtm en t o f D e f e n s e - C i v i l
I n l a n d w a t e r w a y s u b s i d y ................................................................................................

3 -1

D e p a r tm e n t o f T r a n s p o r t a t i o n
S u b s i d i e s f o r a i r w a y a n d a i r p o r t u s e r s .....................................................
B o a t a n d y a c h t u s e r f e e s ..............................................................................................

3 -3
3 -5

4.

APPLY SOUND C R IT E R IA TO ECONOMIC SUBSIDY

PROGRAMS

D e p a rtm e n t o f A g r i c u l t u r e
D a i r y p r i c e s u p p o r t s ............................................................................................................... 4 - 1
A l c o h o l f u e l s a n d b i o m a s s l o a n s ......................................................................... ..... 4 - 3
R u r a l E l e c t r i f i c a t i o n A d m i n i s t r a t i o n ( o f f - b u d g e t ) .......................... 4 - 5
F a r m e r s Home A d m i n i s t r a t i o n d i r e c t l o a n s ............................................... ..... 4 - 8
D e p a r t m e n t o f C om m erce
E c o n o m ic a n d r e g i o n a l
A p p a la c h ia n R e g io n a l

d e v e lo p m e n t ( i n c l u d i n g
C o m m i s s i o n ) ....................................................................

4 -1 0

D e p a r tm e n t o f E n e rg y
S y n t h e t i c f u e l s ........................................................................................................................
F o s s i l e n e r g y ..............................................................................................................................
S o l a r e n e r g y .................................................................................................................................
O t h e r e n e r g y s u p p l y .............................................................................................................
E n e r g y c o n s e r v a t i o n .............................................................................................................
A l c o h o l f u e l s s u b s i d i e s .................................................................................................

4 -1 2
4 -1 4
4 -1 6
4 -1 8
4 -2 0
4 -2 3

D e p a r t m e n t o f H o u s i n g a n d U rb a n D e v e l o p m e n t
S o l a r E n e r g y a n d C o n s e r v a t i o n B a n k .................................................................
C o m m u n ity d e v e l o p m e n t s u p p o r t a s s i s t a n c e ................................................

4 -2 4
4 -2 5

D e p a r tm e n t o f L a b o r
C o m p r e h e n s iv e E m p lo y m e n t a n d T r a i n i n g A c t (C E T A )
p u b l i c s e r v i c e j o b s ..........................................................................................................

4 -2 6

D e p a r tm e n t o f T r a n s p o r t a t i o n
M a ss t r a n s i t o p e r a t i n g s u b s i d i e s .......................................................................
A m tr a k s u b s i d i e s ......................................................................................................................
N o r t h e a s t c o r r i d o r im p r o v e m e n t p r o j e c t .....................................................
Low v o lu m e r a i l r o a d b r a n c h l i n e s ..........................................................................
C o o p e r a t i v e a u t o m o t i v e r e s e a r c h ..........................................................................

4 -2 8
4 -3 0
4 -3 2
4 -3 4
4 -3 5

O th e r A g e n c ie s
A c c e le r a t io n o f m in e r a l le a s in g ( o f f s e t t i n g r e c e i p t s ) . . . . 4 -3 6
CAB a i r l i n e s u b s i d y ............................................................................................................. ...4 - 3 8
C o n r a i l ................................................................................................................................................ .. 4 - 3 9
E x p o r t - I m p o r t B a n k ................................................................................................................ .. 4 - 4 1
P o s t a l S e r v i c e s u b s i d i e s .............................................................................................. .. 4 - 4 3




-29-

Page
5.

STRETCH OUT AND RETARGET PUBLIC SECTOR CAPITAL
IMPROVEMENT PROGRAMS

D e p a r tm e n t o f T r a n s p o r t a t i o n
F e d e r a l h ig h w a y c o n s t r u c t i o n ................................................................................. ..... 5 - 1
U rb a n m a s s t r a n s p o r t a t i o n c a p i t a l g r a n t s ............................................... .....5 - 3
A i r p o r t c o n s t r u c t i o n ........................................................................................................ ..... 5 - 5
O th e r A g e n c ie s
W a t e r r e s o u r c e d e v e l o p m e n t c o n s t r u c t i o n ..................................................
EPA w a s t e t r e a t m e n t g r a n t s .......................................................................................

6.

5 -6
5 -7

IMPOSE F IS C A L RESTRAINT ON OTHER PROGRAMS OF
NATIONAL INTEREST

D e p a r t m e n t o f C om m erce
V a r io u s N a t i o n a l O c e a n ic and A tm o s p h e r ic A d m i n i s t r a t i o n
p r o g r a m s ........................................................................................................................................

6 -1

D e p a r tm e n t o f E d u c a t io n
S c h o o l a s s i s t a n c e in f e d e r a l l y a f f e c t e d a r e a s (im p a c t
a i d ) .................................................................................................................................................... .....6 - 3
V o c a t i o n a l e d u c a t i o n ..............................................................................................................6 - 5
N a t i o n a l I n s t i t u t e o f E d u c a t i o n ..............................................................................6 - 6
I n s t i t u t e o f M useum S e r v i c e s .......................................................................................6 - 7
D e p a r tm e n t o f E n e rg y
E n e r g y r e g u l a t i o n .................................................................................................................
G e n e r a l s c i e n c e .......................................................................................................................
E n e r g y i n f o r m a t i o n a n d o v e r h e a d .........................................................................

6 -8
6 -9
6 -1 0

D e p a r t m e n t o f H e a l t h a n d Human S e r v i c e s
N a t i o n a l I n s t i t u t e s o f H e a l t h ..................................................................................6 - 1 2
M e d i c a l s e r v i c e s f o r m e r c h a n t s e a m e n .......................................................... ...6 - 1 4
H e a l t h p r o f e s s i o n s e d u c a t i o n .....................................................................................6 - 1 6
H e a l t h m a i n t e n a n c e o r g a n i z a t i o n s ...................................................................... ...6 - 1 8
N a t i o n a l H e a l t h S e r v i c e C o r p s ..................................................................................6 - 2 0
R e g u l a t i o n o f h e a l t h c a r e i n d u s t r y ................................................................ ...6 - 2 2
D e p a r t m e n t o f H o u s in g a n d U rb a n D e v e lo p m e n t
P l a n n i n g a s s i s t a n c e ............................................................................................................
R e h a b i l i t a t i o n l o a n f u n d .............................................................................................
N e i g h b o r h o o d s e l f - h e l p d e v e l o p m e n t ................................................................

6 -2 4
6 -2 5
6 -2 6

D e p a r tm e n t o f t h e I n t e r i o r
I m p r o v e t a r g e t i n g o f c o n s e r v a t i o n e x p e n d i t u r e s ..............................
Y o u t h C o n s e r v a t i o n C o r p s .............................................................................................

6 -2 7
6 -2 9

D e p a rtm e n t o f L a b o r
Young A d u lt C o n s e r v a tio n

C o r p s ............................................................................

6 -2 9

D e p a r tm e n t o f T r a n s p o r t a t i o n
H ig h w a y s a f e t y g r a n t s . T . .............................................................................................

6 -3 1




-30-

Page
O th e r A g e n c ie s
C o r p o r a t i o n f o r P u b l i c B r o a d c a s t i n g .............................................................
F o r e i g n a i d ...................................................................................................................................
NASA r e d u c t i o n s ........................................................................................................................
N a t i o n a l C o n su m e r C o o p e r a t i v e B a n k ................................................................
N a t i o n a l E n d ow m en ts f o r t h e A r t s a n d H u m a n i t i e s ...........................
N a t i o n a l S c i e n c e F o u n d a t i o n .....................................................................................

7.

CONSOLIDATE CATEGORICAL GRANT PROGRAMS INTO BLOCK GRANTS

D e p a r tm e n t o f
E le m e n ta r y

E d u c a tio n
an d s e c o n d a r y

D ep a rtm e n t o f
H e a lth and

H e a lth
s o c ia l

8.

6 -3 2
6 -3 3
6 -3 5
6 -3 7
6 -3 9
6 -4 1

e d u c a tio n

p r o g r a m s ......................................

7 -1

a n d Human S e r v i c e s
s e r v i c e s p r o g r a m s ..............................................................

7 -6

REDUCE OVERHEAD AND PERSONNEL COSTS OF THE FEDERAL
GOVERNMENT

D e p a r tm e n t

of

D e f e n s e - M i l i t a r y .....................................................................................

8 -1

O th e r A g e n c ie s
F e d e r a l c i v i l i a n e m p l o y m e n t ..................................................................................... .....8 - 3
F e d e r a l p a y c o m p a r a b i l i t y s t a n d a r d ................................................................. .....8 - 5
R e g u l a t i o n s .................................................................................................................................... .....8 - 8




-31-

INDEX OF PROGRAM PROPOSALS BY AG EN CY

Page
D ep a rtm en t o f A g r i c u l t u r e
F o o d s t a m p s ...............................................................................................................................
C h i l d n u t r i t i o n ....................................................................................................................
R u r a l E l e c t r i f i c a t i o n A d m i n i s t r a t i o n ( o f f - b u d g e t ) ..................
C o m m o d ity C r e d i t C o r p o r a t i o n :
D a i r y p r i c e s u p p o r t s ............
F a r m e r s Home A d m i n i s t r a t i o n :
D i r e c t l o a n s ......................................
A l c o h o l f u e l s and b i o m a s s l o a n s ......................................................................
D e p a r t m e n t o f Com m erce
E c o n o m ic a n d r e g i o n a l d e v e l o p m e n t ( i n c l u d i n g
A p p a l a c h i a n R e g i o n a l C o m m i s s i o n ) ................................................................
V a r i o u s N a t i o n a l O c e a n i c an d A t m o s p h e r i c A d m i n i s t r a t i o n
p r o g r a m s .....................................................................................................................................
D e p a rtm e n t

of

1 -1
2 -1
4 -5
4 -1
4 -8
4 -3

4 -1 0
6 -1

D e f e n s e - M i l i t a r y .................................................................................

8 -1

D ep a rtm en t o f D e f e n s e - C i v i l
I n l a n d w a te r w a y s u b s i d y ( i n c r e a s e i n g o v e r n m e n t a l
r e c e i p t s ) ...................................................................................................................................

3 -1

D ep a rtm en t o f E d u c a tio n
E l e m e n t a r y a n d s e c o n d a r y e d u c a t i o n p r o g r a m s ...................................
S c h o o l a s s i s t a n c e i n f e d e r a l l y a f f e c t e d a r e a s (im p a c t
a i d ) .................................................................................................................................................
V o c a t i o n a l e d u c a t i o n ......................................................................................................
S t u d e n t a s s i s t a n c e ............................................................................................................
N a t i o n a l I n s t i t u t e o f E d u c a t i o n ......................................................................
I n s t i t u t e o f M useum S e r v i c e s ...............................................................................

6 -3
6 -5
2 -3
6 -6
6 -7

D e p a r tm e n t o f E n e rg y
S y n t h e t i c f u e l s ....................................................................................................................
G e n e r a l s c i e n c e ....................................................................................................................
F o s s i l e n e r g y ..........................................................................................................................
S o l a r e n e r g y .............................................................................................................................
O t h e r e n e r g y s u p p l y .........................................................................................................
E n e r g y c o n s e r v a t i o n .........................................................................................................
E n e r g y r e g u l a t i o n ...............................................................................................................
E n e r g y i n f o r m a t i o n a n d o v e r h e a d ......................................................................
A l c o h o l f u e l s s u b s i d i e s .............................................................................................

4 -1 2
6 -9
4 -1 4
4 -1 6
4 -1 8
4 -2 0
6 -8
6 -1 0
4 -2 3

D e p a r t m e n t o f H e a l t h a n d Human S e r v i c e s
M inim um s o c i a l s e c u r i t y b e n e f i t s ...................................................................
S o c i a l s e c u r i t y d i s a b i l i t y i n s u r a n c e .......................................................
S o c i a l s e c u r i t y — a d u l t s t u d e n t b e n e f i t s .........................................
AFDC w e l f a r e p r o g r a m s ...................................................................................................
M e d i c a i d .........................................................................................................................................
H e a l t h a n d s o c i a l s e r v i c e s p r o g r a m s ...........................................................
R e g u l a t i o n o f h e a l t h c a r e i n d u s t r y ..............................................................
N a t i o n a l I n s t i t u t e s o f H e a l t h ............................................................................
H e a l t h p r o f e s s i o n s e d u c a t i o n ...............................................................................
H e a l t h m a in t e n a n c e o r g a n i z a t i o n s ................... . . ........................................
M e d i c a l s e r v i c e s f o r m e r c h a n t s e a m e n ........................................................
N a t i o n a l H e a l t h S e r v i c e C o r p s ............ ...............................................................

1 -5
1 -9
1 -7
1 -1 1
1 -1 5
7 -6
6 -2 2
6 -1 2
6 -1 6
6 -1 8
6 -1 4
6 -2 0




-32-

7 -1

Page

D e p a r t m e n t o f H o u s i n g a n d U r b a n D e v e lo p m e n t.
P l a n n i n g a s s i s t a n c e .........................................................................................................
R e h a b i l i t a t i o n l o a n f u n d ...........................................................................................
N e i g h b o r h o o d s e l f - h e l p d e v e l o p m e n t ..............................................................
P u b l i c h o u s i n g m o d e r n i z a t i o n ...............................................................................
S u b s i d i z e d h o u s i n g r e n t s ...........................................................................................
S u b s i d i z e d h o u s i n g l e v e l s ........................................................................................
S o l a r E n e r g y a n d E n e r g y C o n s e r v a t i o n B a n k .........................................
C o m m u n ity d e v e l o p m e n t s u p p o r t a s s i s t a n c e ............................................

6 -2 4
6 -2 5
6 -2 6
1 -2 1
1 -1 9
1 -1 7
4 -2 4
4 -2 5

D ep a rtm e n t o f th e I n t e r i o r
I m p r o v e d t a r g e t i n g o f c o n s e r v a t i o n e x p e n d i t u r e s ........................
Y o u t h C o n s e r v a t i o n C o r p s . .....................................................................................

6 -2 7
6 -2 9

D ep a rtm en t o f L a b o r
U n e m p lo y m e n t i n s u r a n c e :
E x t e n d e d b e n e f i t s .......................................
U n e m p lo y m e n t i n s u r a n c e :
W ork t e s t ..............................................................
T r a d e a d j u s t m e n t a s s i s t a n c e ..................................................................................
C o m p r e h e n s iv e E m p lo y m e n t a n d T r a i n i n g A c t (C E T A ) p u b l i c
s e r v i c e j o b s ................................... .......................................................................................
B l a c k l u n g ....................................................................................................................................
U n e m p lo y m e n t c o m p e n s a t i o n f o r e x - s e r v i c e m e m b e r s ........................
F e d e r a l e m p l o y e e i n j u r y c o m p e n s a t i o n ( F E C A ) ....................................
Y o u n g A d u l t C o n s e r v a t i o n C o r p s ..........................................................................
D e p a r tm e n t o f T r a n s p o r t a t i o n
F e d e r a l h i g h w a y c o n s t r u c t i o n ................................................................................
U rban m ass t r a n s p o r t a t i o n :
C a p i t a l g r a n t s .......................................
M a ss t r a n s i t o p e r a t i n g s u b s i d i e s ....................................................................
A i r p o r t c o n s t r u c t i o n .......................................................................................................
A m tr a k s u b s i d i e s ...................................................................................................................
N o r t h e a s t c o r r i d o r im p r o v e m e n t p r o j e c t ..................................................
Low v o lu m e r a i l r o a d b r a n c h l i n e s .......................................................................
H ig h w a y s a f e t y g r a n t s ....................................................................................................
C o o p e r a t i v e a u t o m o t i v e r e s e a r c h p r o g r a m ................................................
S u b s i d i e s f o r a i r w a y a n d a i r p o r t u s e r s (F A A — i n c r e a s e
t o g o v e r n m e n t a l r e c e i p t s ) ......................................................................................
B o a t and y a c h t u s e r f e e s ( i n c r e a s e in g o v e r n m e n ta l
r e c e i p t s ) ....................................................................................................................................




-33-

1 -2 2
1 -2 4
1 -3 0
4 -2 6
1 -3 3
1 -2 8
1 -2 6
6 -2 9

5 -1
5 -3
4 -2 8
5 -5
4 -3 0
4 -3 2
4 -3 4
6 -3 1
4 -3 5
3 -3
3 -5

Page

O th e r S a v in g s
A c c e le r a t i o n o f m in e r a l le a s i n g ( o f f s e t t i n g r e c e i p t s ) . . .
EPA w a s t e t r e a t m e n t g r a n t s ....................................................................................
NASA r e d u c t i o n s ....................................................................................................................
CAB a i r l i n e s u b s i d y ........................................................................................................
C o n r a i l ...........................................................................................................................................
C o r p o r a t i o n f o r P u b l i c B r o a d c a s t i n g ..........................................................
E x p o r t - I m p o r t B a n k ...........................................................................................................
F o r e i g n a i d ...............................................................................................................................
N a t i o n a l C o n su m er C o o p e r a t i v e B a n k .............................................................
N a t i o n a l E nd ow m en ts f o r t h e A r t s an d H u m a n i t i e s ........................
N a t i o n a l S c i e n c e F o u n d a t i o n .................................................................................
P o s t a l S e r v i c e s u b s i d i e s .............................................................................. .. ..
S a l l i e Mae ( g u a r a n t e e d s t u d e n t l o a n s — o f f - b u d g e t ) ............
W a t e r r e s o u r c e d e v e l o p m e n t c o n s t r u c t i o n ...............................................
F e d e r a l p a y c o m p a r a b i l i t y s t a n d a r d .............................................................
F ed eral c i v i l i a n r e tir e m e n t:
A n n u a l i n d e x a t i o n ........................
F e d e r a l c i v i l i a n e m p lo y m e n t .................................................................................
R e g u l a t i o n s ...............................................................................................................................




-34-

4 -3 6
5 -7
6 -3 5
4 -3 8
4 -3 9
6 -3 2
4 -4 1
6 -3 3
6 -3 7
6 -3 9
6 -4 1
4 -4 3
2 -5
5 -6
8 -5
1 -3 5
8 -3
8 -8

1.

R EVISE ENTITLEMENTS TO ELIM INATE UNINTENDED BENEFITS

D e p a rtm e n t

of

A g r ic u ltu r e

TARGETED REFORM OF FOOD STAMPS

In a c c o r d w ith t h e A d m i n i s t r a t i o n 's e f f o r t s t o t a r g e t
a s s is ta n c e
to
th e
m ost
needy
fa m ilie s ,
and t o r e s t r a i n t h e u n c o n t r o l l e d
g r o w th o f e n t i t l e m e n t s p e n d i n g , m a jo r c h a n g e s w i l l b e p r o p o s e d i n
t h e f o o d sta m p p r o g r a m .
F or a fa m ily o f fo u r , e l i g i b i l i t y w i l l b e li m i t e d t o th o s e
w h ose
gross
in c o m e
is
le s s
th a n
$ 1 1 ,0 0 0 p e r y e a r — a b o u t $ 9 0 0 p e r
m o n th .
U nder c u r r e n t
la w ,
s im ila r
fa m ilie s
w ith
in c o m e s
in
excess
of
$ 1 4 ,0 0 0
a n n u a lly
are
e lig ib le
fo r
fo o d
sta m p s.
O v e r la p p in g
sch ool
m eal
and
fo o d
s ta m p
s u b s id ie s
w ill
be
e lim in a te d .
B e n e f i t c a l c u l a t i o n s w i l l b e b a s e d on a c t u a l r e c e n t
e a r n i n g s o r p a y m e n ts r a t h e r th a n p r o j e c t e d e a r n i n g s o r
p a y m e n ts.
A
r e c i p i e n t 's i n i t i a l a llo t m e n t w i l l b e p r o -r a t e d t o e n su re th a t
t h e b e n e f i t s p r o v i d e d a r e m o re e q u i v a l e n t t o t h e n u m b er
of
days
in
th e
m o n th
fo r
w h ic h
a s s is ta n c e
is
needed.
L ib e r a liz e d
a l l o t m e n t l e v e l s a n d in c o m e d e d u c t i o n s s c h e d u l e d t o
ta k e
e ffe c t
in
th e
next
fis c a l
year
w ill
be
r e p e a le d .
T ig h te n e d
a d m in is tr a tio n
and
program
m o n ito r in g
w ill
y ie ld
a d d itio n a l
s a v in g s
th ro u g h
red u ced
overhead
co sts,
and
th ro u g h
th e
e l i m i n a t i o n o f p a y m e n t e r r o r s a n d f o o d s ta m p f r a u d .
T h e s e c h a n g e s w i l l h e l p t o r e f o c u s t h e fo o d sta m p p r o g r a m on
its
o r ig in a l
p u rp ose
—
t o e n s u r e a d e q u a t e n u t r i t i o n f o r A m e r i c a 's
needy f a m ilie s .
T h e c o m b in e d
e ffe c t
of
fo o d
s t a m p 's
cu rren t
p r o s p e c tiv e
in c o m e t e s t a n d h i g h d e d u c t i o n s fr o m in c o m e h a s b e e n
t o d i v e r t t h e f o o d s ta m p p r o g r a m a w a y fr o m t h i s o r i g i n a l
p u rp ose
to w a rd
a
g e n e r a liz e d
in c o m e
tr a n sfe r
program ,
r e g a r d le s s o f
n u tr itio n a l need.
By r e s t r u c t u r i n g
fo o d
sta m p s
to
c o m p le m e n t
o th e r
n u tr itio n
p r o g r a m s a n d t a r g e t i n g f u n d s o n t h o s e w h o s e lo w
in c o m e s
prevent
th em
fr o m
m a in ta in in g
an
a d e q u a te
d ie t,
s ig n ific a n t
s a v in g s
can
be
a c h ie v e d w h ile e n s u r in g t h a t n eedy
f a m i l i e s h a v e t h e r e s o u r c e s t o m eet t h e i r n u t r i t i o n a l n e e d s .
T h e se c h a n g e s a r e a l s o d e s ig n e d t o e li m i n a t e a n o m a lie s
fo u n d
in
th e
p r e s e n t p r o g r a m , w h e re f a m i l i e s w it h h i g h a n n u a l in c o m e s a r e
n e v e r t h e l e s s e l i g i b l e f o r fo o d
sta m p s
d u r in g
sh o rt,
te m p o ra r y
p e r io d s
o f u n e m p lo y m e n t .
The p r e s e n t program a l s o p e r m its th o s e
w it h r e l a t i v e l y h i g h in c o m e s t o t a k e h i g h e r o f f s e t s
fo r
s h e lte r
and
c h ild
care
exp en ses
th a n
lo w e r -in c o m e
fa m ilie s .
The
A d m i n i s t r a t i o n ' s p r o g r a m w o u ld
rem ove
4 0 0 ,0 0 0
su ch
h o u s e h o ld s
fr o m
th e
r o lls .
A t t h e sa m e t i m e , a f a m i l y o f f o u r w i t h i n c o m e
b e l o w $ 1 0 , 9 8 5 w o u ld r e c e i v e t h e f u l l n u t r i t i o n a l b e n e f i t —
o n ly
m o d ifie d t o a cco u n t fo r d u p lic a te d n u t r it io n s u b s id ie s .




1-1

T h ese
r e fo r m s t o e f f i c i e n t l y t a r g e t b e n e f i t s t o a c t u a l need w i l l
a ls o h e lp t o r e s t r a i n th e r a te o f in c r e a s e o f
F ederal
s p e n d in g .
As
a r e s u l t , F e d e r a l f o o d sta m p c o s t s w i l l b e $ 1 . 8 b i l l i o n l o w e r
in 1 9 8 2 th a n u n d e r c u r r e n t la w .
O ver t h e 5 -y e a r
p e r io d
th ro u g h
1 9 8 6 , c o s t s w i l l b e re d u ce d b y a b o u t $ 1 1 .7 b i l l i o n .
P r o p o s a ls
w ill
s e v e r a l w ays:

be

advanced

to

change

th e

fo o d

s ta m p

program

in

—

S e t g r o s s in c o m e l i m i t s o n
fo o d
sta m p
e lig ib ility
at
130%
o f th e p o v e r ty l e v e l — a b o u t $ 1 1 ,0 0 0 p e r y e a r f o r
a f a m ily o f fo u r — in 1 9 8 2 .
In
c a lc u la tin g
b e n e fits
fo r
h o u s e h o ld s
w ith
earned
in c o m e ,
th e
c u r r e n t 20%
e a r n e d in c o m e
d e d u c tio n
w o u ld
be
kept
to
encou rage
c o n tin u e d
w o r k fo r c e
p a r tic ip a tio n .
O th e r
d e d u c tio n s
fr o m g r o s s in c o m e w o u ld c o n t i n u e t o b e u s e d t o e s t a b l i s h
b e n e fit le v e ls fo r
each
h o u s e h o ld .
T h ese
d e d u c tio n s
w o u ld
no
lo n g e r
be
in d e x e d
to
p r ic e
ch an ges.
The
c o m b in e d e f f e c t o f t h e s e c h a n g e s w o u ld p r e v e n t t h o s e who
a r e t e m p o r a r i l y o u t o f w o rk d u e t o s e a s o n a l o r v o l u n t a r y
p e r i o d s o f u n e m p lo y m e n t fr o m r e c e i v i n g b e n e f i t s ,
u n le s s
th e ir
in c o m e
w as
lo w
over
a
s u s ta in e d
p e r io d .
S i m i l a r l y , f a m i l i e s w h ose h i g h e r l i v i n g s t a n d a r d s
a llo w
th e m
to
ta k e
d is p r o p o r tio n a te
a d v a n ta g e
of
excess
s h e l t e r c o s t d e d u c t i o n s w o u ld n o l o n g e r b e e l i g i b l e .
Of
t h e 9 m i l l i o n f o o d sta m p r e c i p i e n t s w h o s e
m a jo r
sou rce
of
in c o m e
is
in c o m e
tr a n sfe r
p a y m e n ts
and
in -k in d
b e n e f i t s s u c h a s h o u s i n g a s s i s t a n c e , t h e in c o m e
c e ilin g
w o u ld
have
l e s s o f an e x c l u s i o n a r y e f f e c t a s t h e v a l u e
o f i n - k i n d b e n e f i t s w o u ld c o n t i n u e t o b e e x c l u d e d .

—

E l i m i n a t e o v e r l a p p i n g f o o d s ta m p a n d
fr e e
sch ool
m eal
s u b s id ie s .
The
m o n t h ly f o o d s ta m p b e n e f i t i s b a s e d on
th e a s s u m p tio n t h a t a l l m e a ls f o r t h e f a m i ly
are
ea ten
at
hom e.
F o r s t u d e n t s fr o m f a m i l i e s w i t h i n c o m e s b e l o w
$ 1 1 , 6 4 0 , f r e e s c h o o l m e a l s w i l l r e m a i n a v a i l a b l e i n m o re
th a n n i n e - t e n t h s o f t h e N a t i o n 's s c h o o l s .
T h ese
sch ool
m e a ls
are
in te n d e d
to
m eet
o n e - t h i r d o f a s t u d e n t 's
d a ily n u tr itio n a l n eeds.
F o r s t u d e n t s who r e c e i v e
b o th
fo o d
sta m p s
and
fre e
sch ool
m e a ls ,
th e
F ederal
G overn m en t
s u b s id iz e s
fo u r
ra th e r
th re e
m e a ls
each
sch ool
day.
To
e lim in a t e
t h i s s u b s id y o v e r la p , fo o d
sta m p a l l o t m e n t s w i l l b e a d j u s t e d
fo r
h o u s e h o ld s
w ith
s t u d e n t s i n p r im a r y and s e c o n d a r y s c h o o l s t o r e f l e c t t h e
v a lu e
of
fr e e
sch ool
m e a ls .
F a m ilie s w ith s tu d e n ts
w it h o u t a c c e s s t o s u b s i d i z e d s c h o o l m e a ls and t h o s e
who
cannot
eat
m e a ls
at
sch ool
fo r r e lig io u s or d ie ta r y
re a so n s w i l l n o t have t h e ir a llo tm e n ts ch an ged .

—

C a l c u l a t e e l i g i b i l i t y on t h e b a s i s o f
h o u s e h o ld
in c o m e
in
th e
p r io r
p e r io d .
S ta te s
now h a v e t h e o p t i o n t o
e i t h e r e s t i m a t e f u t u r e in c o m e o r u s e t h e
p r io r
m o n t h 's
in c o m e
to
d e te r m in e
h o u s e h o ld
in c o m e
e lig ib ility .
E s t i m a t i n g f u t u r e in c o m e c a n e a s i l y r e s u l t i n
erron eou s
p a y m e n ts
or
in a c c u r a te e l i g i b i l i t y d e te r m in a tio n s .
In
a d d it i o n t o p r e v e n t in g o v erp a y m e n ts
due
to
errors
in
in c o m e
r e p o r t in g , t h i s p r o p o s a l h a s th e added a d v a n ta g e




1-2

o f e n s u r in g t h a t f a m i li e s can n o t ta k e a d v a n ta g e o f
fo o d
sta m p s
d u r in g
te m p o ra ry
p e r io d s
of
v o lu n ta r y
or
f o r e s e e a b l e u n e m p lo y m e n t u n l e s s t h e i r
a v a ila b le
in c o m e
is
tr u ly
lo w .
B ecau se
b o th
e l i g i b i l i t y and b e n e f i t
d e t e r m i n a t i o n s w o u ld
be
based
on
a n n u a liz e d
average
in c o m e
d u r in g
th e
p r io r
p e r io d ,
th e
lo n g e r -t e r m
u n e m p lo y e d w o u ld b e c o m e e l i g i b l e f o r b e n e f i t s
as
th e ir
fu n d s ru n o u t .
P r o - r a t e f i r s t m o n t h 's b e n e f i t s t o r e f l e c t
th e
p o r tio n
of
th e
m o n th
fo r
w h ic h
a s s is ta n c e is needed.
U nder
c u r r e n t l a w , a r e c i p i e n t who
is
c e r tifie d
and
is s u e d
fo o d
sta m p s
la te
i n t h e m o n th r e c e i v e s a f u l l m o n t h l y
a llo tm e n t.
U n d e r t h i s p r o p o s a l , t h o s e who n e e d h e l p f o r
l e s s t h a n a f u l l m o n th w hen t h e y f i r s t
a p p ly
fo r
fo o d
s t a m p s w o u ld r e c e i v e a p r o - r a t e d a l l o t m e n t .
R e p e a l p r o v i s i o n s s c h e d u le d f o r 1 9 8 2 t h a t w i l l
in c r e a se
f u t u r e f o o d s ta m p c o s t s .
T h e 1 9 8 0 F o o d S ta m p A m en d m en ts
a llo w
th e
S e c r e ta r y o f A g r ic u lt u r e , b e g in n in g in 1 9 8 2 ,
to p r o je c t
p r ic e
changes
in
c a lc u la tin g
fo o d
s ta m p
a llo tm e n ts
and
in c o m e
d e d u c tio n s .
The A d m i n i s t r a t i o n
recom m en ds t h a t a u t o m a t ic b e n e f i t i n c r e a s e s b e b a s e d
on
a
1 2 -m o n th
p e r i o d o f a c t u a l p r i c e c h a n g e s w h ic h a v o id s
th e u n c e r t a in t y o f p r o j e c t i n g fo o d c o s t s .
In
a d d itio n ,
s p e c ia liz e d
d e d u c tio n s
fo r
1982
added
in th e r e c e n t
a m e n d m e n ts
w ill
be
p rop osed
fo r
r e p e a l.
Ite m iz e d
d e d u c t i o n s c o m p l i c a t e f o o d s ta m p a d m i n i s t r a t i o n a n d h e l p
t o c a u s e e r r o n e o u s p a y m e n t s t o f o o d s ta m p r e c i p i e n t s .
Im p ro v e o v e r a l l
m anagem ent
and
m o n ito r in g
to
en su re
c o m p lia n c e .
W h ile
recen t
le g is la tiv e
c h a n g e s p e r m it
S ta te s
to
im p r o v e
b e n e fic ia r y
tr a c k in g
and
in c o m e
v e r i f i c a t i o n a n d m ake o t h e r m a n a g e m e n t i m p r o v e m e n t s , n o t
a ll
S ta te s
are
f u l l y a p p ly in g a v a i l a b l e te c h n iq u e s t o
id e n tify ,
p rev e n t,
and
correct
paym ent
errors
and
recover
o v erp a y m e n ts.
S h i f t i n g t o r e t r o s p e c t i v e in c o m e
a c c o u n t i n g w i l l a l s o im p r o v e r o u t i n e in c o m e v e r i f i c a t i o n
and s a m p lin g t e c h n i q u e s .
T h ese
m easu res
w ill
en su re
th a t
b e n e fits
are
p a id
o n ly to th e t r u l y n e e d y , th a t
fr a u d u le n t c la im s a r e d e t e c t e d and
d e te rre d ,
and
th a t
a ll
a p p lic a tio n s ,
in te r v ie w s ,
and
tr a n s a c tio n s
are
c o n d u c te d in th e m ost e f f i c i e n t and sp e e d y m an n er.




1- 3

The p r o p o s a l

is

e x p e c te d

to

r e s u lt




th e

fo llo w in g

(in m illio n s
1983
1982

1981
C u rren t b a s e :
B udget a u t h o r i t y .. . .
O u t l a y s ....................................
P o lic y r e d u c tio n :
B udget a u t h o r i t y .. . .
O u t l a y s ....................................
P rop osed b u d g e t:
Budget a u t h o r i t y .. . .
O u t l a y s ....................................

in

change:

o f d o lla r s )
1984
1985

1986

1 1 ,0 8 4
1 0 ,9 5 0

1 2 ,5 7 0
1 2 ,4 7 3

1 3 ,1 7 1
1 3 ,0 7 0

1 3 ,6 0 7
1 3 ,5 0 3

1 3 ,9 9 0
1 3 ,8 8 3

1 4 ,1 6 0
1 4 ,0 5 1

-1 5 0
-1 5 0

-1 ,8 2 8
-1 ,8 2 2

-2 ,0 1 2
-2 ,0 0 4

-2 ,4 6 2
-2 ,4 5 1

-2 ,6 3 6
-2 ,6 2 4

-2 ,7 7 1
-2 ,7 5 9

1 0 ,9 3 4
1 0 ,8 0 0

1 0 ,7 4 2
1 0 ,6 5 1

1 1 ,1 5 9
1 1 ,0 6 6

1 1 ,1 4 5
1 1 ,0 5 2

1 1 ,3 5 4
1 1 ,2 5 9

1 1 ,3 8 9
1 1 ,2 9 2

1-4

He al th and Human Services

ELIM IN ATIN G THE SO CIAL

SECURITY MINIMUM PAYMENT AMOUNT

S in c e th e en a ctm en t o f s o c i a l
s e c u r ity ,
a
n u m b er
of
unearned
b e n e fits
have
been
added
to
th e
c o r e o l d - a g e and s u r v i v o r 's
in su r a n c e
program .
In
recen t
years,
th e se
a d d -o n s
have
th re a te n e d
th e
c o n tin u e d
s o lv e n c y o f th e b a s ic s o c i a l s e c u r it y
program .
W h ile fu n d a m e n ta l p rog ram r e fo r m s
w ill
be
needed
to
prevent
th e
in s o lv e n c y
of
th e
s o c ia l
s e c u r ity
t r u s t fu n d s,
e l i m i n a t i n g t h e s e a d d -o n p a y m e n ts i n 1 9 8 1 c a n a c h i e v e s i g n i f i c a n t
s a v i n g s , e n h a n c in g th e a b i l i t y o f t h e s o c i a l s e c u r i t y
sy ste m
to
m eet
o u r n a t i o n a l c o m m itm e n t t o p r o v i d e a d e q u a t e s o c i a l s e c u r i t y
in c o m e t o o u r N a t i o n ' s r e t i r e d w o r k e r s .
O ne
m a jo r
paym ent
a d d -o n
has
been
th e
s o -c a lle d
"m in im u m
b e n e f it ."
R e g a r d le s s
o f t h e am ount o f s o c i a l s e c u r i t y b e n e f i t s
t h a t a r e t i r e e i s e l i g i b l e f o r b a s e d on h i s e a r n i n g s
h is to r y
in
covered
e m p lo y m e n t ,
th e
m inim um
paym ent
p r o v is io n r a i s e s th e
b a s i c b e n e f i t t o a t l e a s t $ 1 2 2 p e r m o n th .
The o r i g i n a l p u rp o se o f t h i s p r o v is io n —
f i r s t e n a cted
in
1939
a t a $ 1 0 p e r m o n th l e v e l — w as t o i n c r e a s e r e t i r e m e n t in c o m e f o r
th o se
w ith
very
lo w
w age
h is to r ie s ,
and
fo r
th o se
w h ose
e m p lo y m e n t w as p r i m a r i l y b e f o r e
s o c ia l
s e c u r ity
covered
th e ir
w ork
in
th e
s y s t e m 's
e a r ly
years.
S in c e 1 9 7 4 , h o w e v e r, th e
s u p p l e m e n t a l s e c u r i t y in c o m e
program
(S S I)
has
p r o v id e d
cash
a s s is ta n c e
to
su ch
r e tir e e s .
I n f a c t , t h e m a in e f f e c t o f t h e
m inim um p a y m e n t f o r
th e se
w ork ers
is
to
o ffs e t,
d o lla r
fo r
d o l l a r , t h e a m o u n t o f S S I a s s i s t a n c e t h e y w o u ld r e c e i v e w e r e t h e y
n o t r e c e iv in g e le v a te d s o c i a l s e c u r it y b e n e f i t s .
Now
th a t
m o s t e m p lo y m e n t h a s b e e n c o v e r e d u n d e r s o c i a l s e c u r i t y
f o r a t l e a s t 30 y e a r s , th e
m a in
b e n e fic ia r ie s
of
th e
m inim um
paym ent
p r o v is io n
a r e t h o s e w i t h s h o r t w o rk h i s t o r i e s i n s o c i a l
s e c u r i t y - c o v e r e d e m p lo y m e n t,
c h ie fly
due
to
lo n g
p e r io d s
of
F ederal
c iv ilia n
e m p lo y m e n t.
Su ch
r e tir e e s ,
o f c o u rse , a ls o
r e c e iv e g e n e ro u s F e d e r a l p e n s i o n s I n 1 9 7 8 , in f a c t , th e a v e r a g e
F e d e r a l a n n u i t a n t r e c e i v i n g s o c i a l s e c u r i t y m inim um p a y m e n t s
had
F e d e r a l p e n s i o n in c o m e o f $ 9 0 0 p e r m o n t h .
A n o t h e r 10% o f m inim um
b e n e fit
r e c i p i e n t s h a v e w o r k in g s p o u s e s e a r n in g a t l e a s t $ 1 4 ,0 0 0
per y ea r.
B e c a u s e t h e s e r e c i p i e n t s r e c e i v e s o c i a l s e c u r i t y p a y m e n ts f a r
in
excess
of
t h e l e v e l t o w h ic h t h e i r s p o t t y c o n t r i b u t i o n s e n t i t l e
th e m , t h e y r e p r e s e n t a s e r i o u s d r a i n on t h e s o c i a l s e c u r i t y t r u s t
fu n d s.
E l i m i n a t i n g t h e "m in im u m b e n e f i t " w o u ld s t o p t h i s
d r a in ,
w ith o u t
r e d u c in g b e n e f i t s f o r t r u l y n eed y r e t i r e e s a t a l l ; t h e i r
b e n e f i t s w o u ld b e r e p l a c e d , d o l l a r f o r d o l l a r , b y
in c r e a s e d
SSI
in c o m e .
O n ly
17%
( 5 0 0 ,0 0 0 )
of
m inim um
b e n e fit
r e c ip ie n ts ,
h o w e v e r , a r e t r u l y n e e d y ; GAO h a s f o u n d t h a t a t l e a s t 74% d o
not
"d e p e n d
p r im a r ily "
on
th e ir
s o c ia l
s e c u r ity
fo r
r e tir e m e n t
in c o m e .




1-5

1981
C u r r e n t b a s e ............
P o lic y r e d u c tio n .
P ro p o sed b u d g e t ..

O u t l a y s (in m i l l i o n s o f d o l l a r s )
1982
1983
1984
1985

1 3 8 ,0 2 2
-5 0
1 3 7 ,9 7 2

1 5 7 ,8 3 7
-1 ,0 0 0
1 5 6 ,8 3 7

1 7 5 ,5 1 5
-1 ,1 0 0
1 7 4 ,4 1 5

1 9 1 ,1 3 4
-1 ,1 0 0
1 9 0 ,0 3 4

1986

2 0 6 ,5 7 9 2 2 1 ,5 7 3
- 1 ,1 0 0 -1 ,1 0 0
2 0 5 ,4 7 9 2 2 0 ,4 7 3

NOTE:
S a v in g s
assu m e
th e
changes
w ill
be
e ffe c tiv e
A u gu st 1 ,
1981,
ta k e in t o a cc o u n t a s s o c ia t e d in c r e a s e s in o th e r
F ederal
a s s is ta n c e
program s,
and
are
s e n s itiv e
to
e c o n o m ic
a s s u m p tio n s .

_________ ( i n m i l l i o n s o f
1981
1982
1983
N et

s a v i n g s fr o m p r o p o s a l .
S o c ia l s e c u r it y s a v in g s
fr o m p r o p o s a l ........................
S S I i n c r e a s e fr o m
p r o p o s a l ......................................




-5 0

-1 ,0 0 0

-1 ,1 0 0

d o l l a r s ) _________
1984
1985
-1 ,1 0 0

-1 ,1 0 0

( -6 0 ) ( -1 ,3 0 0 ) ( -1 ,4 0 0 ) ( -1 ,5 0 0 ) ( -1 ,5 0 0 )
(1 0 )

1-6

(3 0 0 )

(3 0 0 )

(4 0 0 )

(4 0 0 )

Health and Human Services

ELIM IN ATIN G

SO CIAL SECURITY PAYMENTS TO ADULT STUDENTS

S o c i a l s e c u r i t y f a c e s a g r o w in g s o l v e n c y t h r e a t .
As one
e le m e n t
of
a s s u r in g
b a s ic
b e n e fits
t o r e t i r e d o r d i s a b l e d w o r k e r s and
th e ir
s u r v iv o r s ,
th e
A d m in is tr a tio n
p la n s
to
e lim in a te
th e
a d d itio n a l
b e n e f i t s p r e s e n t l y p a id t o s t u d e n t s w h ose p a r e n t s a r e
s o c ia l s e c u r ity b e n if ic ia r ie s .
P a y m e n ts t o s t u d e n t s f r o m
s o c ia l
s e c u r ity
a r e u n r e la t e d t o e d u c a t io n a l c o s t o r n eed and d u p li c a t e
m ore a p p r o p r i a t e F e d e r a l s t u d e n t
a s s is ta n c e
p rogram s.
W ith o u t
s o c ia l
s e c u r ity ,
lo w
a n d m i d d l e in c o m e a d u l t s t u d e n t s w o u ld b e
e lig ib le
fo r
F ederal
stu d e n t
a s s is ta n c e
ta ilo r e d
to
th e ir
e d u c a tio n a l
c o sts
and
need.
E lim in a tin g s o c i a l
s e c u r ity fo r
s t u d e n t s w o u ld a d d $ 7 b i l l i o n t o t h e s o c i a l s e c u r i t y t r u s t
fu n d s
b y 1 9 8 6 — w ith o u t h ig h e r ta x b u r d e n s .
A d u lt s t u d e n t p a y m e n ts w ere a d d ed a s a m a r g in a l b e n e f i t t o s o c i a l
s e c u r ity
i n 1 9 6 5 , w hen t h e t r u s t f u n d s h a d c o n s i d e r a b l e r e s e r v e s
and s o c i a l s e c u r i t y b e n e f i t s w ere
much
lo w e r .
S tu d en t
s o c ia l
s e c u r ity
is
in a p p r o p r ia te
and
in e ffic ie n t
as
a com ponent o f
s o c i a l in s u r a n c e .
O ld -a g e , s u r v iv o r s
and
d is a b ility
in s u r a n c e
p ro te c ts
a g a in s t
lo s s
o f in c o m e fr o m r i s k s t h a t a r e b e y o n d t h e
w o r k e r 's
c o n tro l
(o ld
age,
d is a b ility ,
and
d e a th ).
S o c ia l
s e c u r ity
s h o u ld
n o t u n i v e r s a l l y in s u r e a s t u d e n t 's c h o ic e t o g o
t o sc h o o l beyond age 1 8 ,
e s p e c ia lly
s in c e
e s ta b lis h e d
F ederal
program s b e t t e r t a r g e t stu d e n t a s s i s t a n c e .
S tu d en t
p a y m e n t s h a v e g ro w n fr o m $ 1 6 5 m i l l i o n i n 1 9 6 5 t o o v e r $ 2
b i l l i o n in 1 9 8 1 ,
w ith
average
per
c a p ita
p a y m e n ts
g o in g
up
o n e -th ir d
fa ste r
th a n
th e
C P I.
W h ile
th e
n u m b er
o f a d u lt
s t u d e n t s on s o c i a l s e c u r i t y r o s e by
o n ly
25%
in
th e
p ast
10
y e a r s , t h e c o s t o f s t u d e n t p a y m e n t s w e n t up 2 4 0 % .
T h e s e p a y m e n ts
fr o m
o ld -a g e ,
s u r v iv o r s ,
and
d is a b ility
in s u r a n c e
a r e now a
s i g n i f i c a n t d r a i n on t h e
tru st
fu n d s,
one
w h ic h
th e
G en eral
A c c o u n t i n g O f f i c e re c o m m e n d s s h o u l d b e e n d e d ( R e p o r t s HRD 7 9 - 1 0 8 ,
A u g u s t 3 0 , 1 9 7 9 , a n d HRD 8 1 - 3 7 , D e c e m b e r 3 1 , 1 9 8 0 ) .
S tu d en t
p a y m e n t s fr o m s o c i a l s e c u r i t y c u r r e n t l y a v e r a g e $ 2 5 5 p e r
m o n t h , b u t r a n g e fr o m $ 2 0 t o $ 7 0 0 .
S tu d e n ts
w h ose
p a re n ts
had
lo w
e a r n in g s
g e t lo w p a y m e n t s fr o m s o c i a l s e c u r i t y , w h i l e t h o s e
w ith h ig h -e a r n in g
p a re n ts
get
h ig h
p a y m e n ts,
m a k in g
stu d e n t
s o c i a l s e c u r i t y p a y m e n ts i n v e r s e l y r e l a t e d t o n e e d .
In
c o n tra st,
m ost
o t h e r F e d e r a l s t u d e n t a s s i s t a n c e i s b a s e d on
need.
N o n -s o c ia l
s e c u r ity
F ederal
stu d e n t
a s s is ta n c e
has
in c r e a s e d
over
2 0 - f o l d , fr o m $ 2 8 4 m i l l i o n i n 1 9 6 5 t o $ 7 b i l l i o n
in
1981.
Of
th e
8 0 0 ,0 0 0
stu d e n ts
on
s o c ia l
se c u r ity ,
a p p r o x im a te ly
2 5 0 ,0 0 0
w o u ld
becom e
n e w ly
e lig ib le
fo r b a s ic
e d u c a tio n a l
o p p o r tu n ity
(P e ll)
g ra n ts,
w ith
o th e r
stu d e n ts
n e e d in g
F ederal
a ss is ta n c e
e l i g i b l e fo r in s u r e d s tu d e n t lo a n s ,
n a tio n a l d e fe n se stu d e n t lo a n s , e t c .




1- 7

T h i s p r o p o s a l w o u ld
e lim in a t e
th e
stu d e n t
p a y m e n ts.
No
new
r e c ip ie n ts
w o u ld b e e l i g i b l e , a n d c u r r e n t s t u d e n t p a y m e n t s w o u ld
b e r e d u c e d b y 25% a n n u a l l y u n t i l t h e s t u d e n t r e a c h e s a g e 2 2 .

1981
C u r r e n t b a s e ............
P o lic y r e d u c tio n .
P ro p o sed b u d g e t ..

1 3 8 ,0 2 2
-2 0
1 3 8 ,0 0 2

O u tla y s
1982
1 5 7 ,8 3 7
-7 0 0
1 5 7 ,1 3 7

(in m illio n s o f
1983
f9 8 4
1 7 5 ,5 1 5
-1 ,2 0 0
1 7 4 ,3 1 5

1 9 1 ,1 3 4
- 1 ,5 0 0
1 8 9 ,6 3 4

d o lla r s )
1985 “
2 0 6 ,5 7 9
-1 ,7 0 0
2 0 4 ,8 7 9

1986
2 2 1 ,5 7 3
-1 ,7 0 0
2 1 9 ,8 7 3

NOTE:
S a v in g s
assu m e
th e
changes
w ill
be
e ffe c tiv e
A u gu st 1 ,
1981,
ta k e i n t o a cco u n t a s s o c ia t e d in c r e a s e s in o th e r
F ederal
a s s is ta n c e
program s,
and
are
s e n s itiv e
to
e c o n o m ic
a s s u m p tio n s .




1- 8

Health and Human Services

TIGHTENING E L I G I B I L I T Y

FOR D IS A B IL IT Y

INSURANCE

The
A d m in is tr a tio n
w ill
red u ce
r a p id ly
g r o w in g
d is a b ility
in s u r a n c e
co sts
by
tig h te n in g
a d m in is tr a tio n
and e n d in g m is ­
d ir e c te d b e n e f it s .
A new m a n a g e m e n t t e a m
w ill
ta k e
a c tio n
to
e lim in a te
in e lig ib le
p a y m e n ts,
and
th e
A d m in is tr a tio n
w ill
p r o p o s e l e g i s l a t i o n t o r e l a t e d i s a b i l i t y b e n e f i t s m o re c l o s e l y t o
a d i s a b l e d w o r k e r 's p r i o r e a r n i n g s .
D i s a b i l i t y in s u r a n c e b e n e f i t s r e p la c e l o s t e a r n in g s f o r
d is a b le d
w ork ers
and
th e ir
f a m i l i e s , a l l o w i n g r e c i p i e n t s t o m a in t a i n an
a d e q u a te l i v i n g sta n d a rd
d e s p ite
th e ir
in a b ility
to
w o rk
to
su p p ort t h e ir fa m ilie s .
T h is i s th e p u rp o se o f s o c i a l in s u r a n c e .
In
Jan u ary o f
re p o rted t h a t :

1981,

h ow ever,

th e

G en eral

A c c o u n tin g

O ffic e

(GAO)

" t h e r e may b e a s
m any
as
5 8 4 ,0 0 0
b e n e fic ia r ie s
not
c u r r e n tly
d is a b le d
but
s till
r e c e iv in g
d is a b ility
b e n e fits .
T h ese
b e n e fic ia r ie s
rep resen t
over
$2
b i l l i o n a n n u a l l y i n T r u s t Fund c o s t s . "
S o c ia l
S e c u r ity
A d m in is tr a tio n
(S S A ) s t u d i e s c o n f i r m t h a t h u g e
su m s
are
p a id
in c o r r e c tly
to
in d iv id u a ls
m is c la s s ifie d
as
d is a b le d .
As
a
r e s u lt,
DI
c a s e l o a d s h a v e r i s e n b y 80% s i n c e
1 9 7 0 , and c o s t s h a v e c lim b e d b y 5 0 0 % .
U nder
th e
d ir e c tio n
of
th is
A d m in is tr a tio n ,
th e
SSA
w i l l b e g in t o i n t e n s i v e l y r e v ie w
c a s e s t o in s u r e t h a t o n ly th e t r u l y d is a b le d
r e c e iv e
d is a b ility
b e n e fits .
O v e r ly -g e n e r o u s
b e n e f i t l e v e l s i n d u c e so m e i n d i v i d u a l s t o r e m a i n
on d i s a b i l i t y in s u r a n c e lo n g a f t e r an y t r u e d i s a b i l i t y
has
been
overcom e.
T h i s f r e q u e n t l y o c c u r s w hen a r e c i p i e n t ' s DI b e n e f i t s
e x c e e d t h e w a g e l e v e l o f h i s c u s t o m a r y w o r k , e s p e c i a l l y now
th a t
in d e x in g
i n r e c e n t y e a r s h a s d r i v e n up t h e v a l u e o f D I b e n e f i t s .
I n a d d i t i o n , D I b e n e f i c i a r i e s may
r e c e iv e
b o th
d is a b ility
and
w ork ers'
c o m p e n s a tio n
fr o m
p la n s s p o n s o r e d b y e m p lo y e r s o r t h e
S ta te s.
T o r e m o v e t h i s w o rk d i s i n c e n t i v e , a
"m e g a c a p "
w ill
be
e s ta b lis h e d
on
b e n e f i t s t h a t DI b e n e f i c i a r i e s r e c e i v e t o e n s u r e
th a t
d is a b ility
in c o m e
fr o m
a ll
sou rces
never
exceeds
th e
w o r k e r 's
p r io r
e a r n in g s , a d ju s te d f o r i n f l a t i o n .
T h is p r o p o s a l
w i l l p r e v e n t DI r e c i p i e n t s w i t h m u l t i p l e
sou rces
of
d is a b ility
p a y m e n t s fr o m r e c e i v i n g o v e r l y - g e n e r o u s b e n e f i t s .
The
A d m i n i s t r a t i o n w i l l a l s o p r o p o s e l e g i s l a t i o n t o m o re c l o s e l y
t i e e l i g i b i l i t y f o r DI t o t h o s e who h a v e p a i d t h e i r f a i r s h a r e o f
c o n tr ib u tio n s t o th e s o c i a l s e c u r it y sy ste m .
U nder c u r r e n t
la w ,
p e o p le
who
have
not
p a id
s o c i a l s e c u r i t y t a x e s in th e p a s t 5
y ea rs are e li g i b l e fo r d i s a b i li t y b e n e fit s .
R e q u ir in g d i s a b i l i t y
i n s u r a n c e b e n e f i c i a r i e s t o h a v e h ad a m ore r e c e n t
a tta c h m e n t
to
th e
w o rk fo rc e
—
m easu red
by
w o r k in g
6
out
o f t h e l a s t 13




1-9

q u a r t e r s — w o u ld
o f l o s t (c o v e r e d )

m ore c l o s e l y
e a r n in g s .

lin k

b e n e fits

to

th e

r e p la c e m e n t

The
net
e ffe c t
of
th e s e p r o p o s a ls w i l l b e t o e n su re t h a t o n ly
t h o s e who a r e t r u l y d e s e r v i n g o f s u p p o r t a r e a d d e d t o t h e b e n e f i t
r o l l s , a n d t o e v e n t u a l l y e l i m i n a t e t h o s e who a r e c a p a b l e o f s e l f su p p o rt.
T h e s e r e f o r m s w i l l r e d u c e t h e d r a i n on
th e
d is a b ility
i n s u r a n c e t r u s t fu n d a s f o l l o w s .

O u tla y s ( i n m i l l i o n s o f
1984
1983
1981
1982
C u r r e n t b a s e ..............................
P o lic y r e d u c tio n :
Im p r o v e
a d m i n i s t r a t i o n ............
In s titu te a
" m e g a c a p " ...........................
T ig h te n r e c e n c y -o f w o rk t e s t ...........................
P r o p o s e d b u d g e t .....................

d o lla r s )
1986
1985

1 7 ,4 0 0

►1 7 3
,

2 0 ,6 2 1

2 1 ,8 8 4

2 3 ,2 3 3

2 4 ,7 3 4

-5 0

-2 0 0

-5 0 0

-7 0 0

-9 0 0

-1 ,1 0 0

-5

-5 0

-7 5

-1 0 0

-1 2 5

-1 5 0

-1 0
1 7 ,3 3 5

-3 0 0
1 ,6 2 3

-6 0 0
1 9 ,4 4 6

-9 0 0
2 0 ,1 8 4

-1 ,2 0 0
2 1 ,0 0 8

-1 ,5 0 0
2 1 ,9 8 4

NOTE:
S a v in g s assu m e t h e ch a n g e s w i l l b e e f f e c t i v e J u ly 1 ,
1 9 8 1 , ta k e in t o a c c o u n t a s s o c ia t e d
in c r e a s e s
in
o th e r
F ederal
a s s i s t a n c e p r o g r a m s , and a r e s e n s i t i v e t o e c o n o m ic a s s u m p t i o n s .

B ackgrou n d. — D i s a b i l i t y
in s u r a n c e
b e n e f i t s a r e p a id
w o r k e r s a n d t h e i r f a m i l i e s w hen a d i s a b l e d w o r k e r i s :
"c u r r e n t ly i n s u r e d ,"
w h ic h
s o c ia l
s e c u r ity
e a r n in g s
c a le n d a r q u a r t e r s ;

g e n e r a lly
in
20
of

to

d is a b le d

r e q u ir e s
h a v in g
th e
p r e v io u s 40

—

d e te r m in e d b y
S ta te
d is a b ility
d e te r m in a tio n
s e r v ic e
a d ju d ic a to r s
to
su ffe r
fro m
a
to ta lly
d is a b lin g
c o n d it io n e x p e c te d t o p e r s i s t a t l e a s t one y e a r ; and

—

u n a b le

to

engage

The c o s t s o f d i s a b i l i t y
a s sh o w n b e l o w :

in

"s u b s ta n tia l

in su r a n c e

have

g a in fu l

g ro w n b y

N um ber o f
D is a b le d W ork ers
Annual B e n e fit s
R e c e iv in g B e n e f i t s ($ m i l l i o n s )
1 9 6 5 ..................
1 9 7 0 ..................
1 9 7 5 ..................
1 9 3 1 ..................
1 9 8 5 ..................




9 8 8 ,0 7 4
1 ,4 9 2 ,9 4 8
2 ,4 8 8 ,7 7 4
2 ,8 6 9 ,0 0 0
2 ,9 9 1 ,0 0 0

1 ,1 5 9
2 ,3 5 2
6 ,7 4 7
1 6 ,9 7 8
2 4 ,0 0 0

1-10

a c t i v it y ."

le a p s

and b o u n d s ,

A verage
M o n th ly B e n e f i t s
98
131
226
410
655

Health and Human Services

COST REDUCTION AND IMPROVED MANAGEMENT OP WELFARE PROGRAMS

The P r e s id e n t p la n s t o p r o p o s e s e v e r a l
r e fo r m s
to
th e
a id
to
fa m ilie s
w ith
dependent
c h ild r e n
(AFDC)
and
c h ild
su p port
e n f o r c e m e n t (C S E ) p r o g r a m s , w h i c h a r e a d m i n i s t e r e d b y HH S.
T h ese
c h a n g e s a r e d e s i g n e d t o d e t e r m i n e w e l f a r e n e e d s m o re
a c c u r a te ly ,
im p r o v e
program
a d m in is tr a tio n ,
red u ce
fr a u d
and
a b u s e , and
d e c r e a s e F e d e r a l and S t a t e c o s t s .
AFDC p r o v i d e s F e d e r a l f u n d s t o S t a t e s o n a m a t c h i n g b a s i s t o
pay
cash
w e lfa r e b e n e f i t s t o n eedy f a m i li e s w ith d e p e n d en t c h i ld r e n .
CSE f i n a n c e s 75% o f S t a t e s ' c o s t s
of
e n fo r c in g
and
c o lle c tin g
c h i l d s u p p o r t fr o m l i a b l e a b s e n t p a r e n t s .
W h ile
e ffo r ts
have
been
m ade
in
th e
past
to
t i g h t e n AFDC
e l i g i b i l i t y a n d p r e v e n t f r a u d a n d a b u s e , much m o r e r e m a i n s t o
be
done.
A n o m a lie s
in
th e
p resen t
sy ste m
o fte n
r e s u l t in th e
paym ent o f c a sh w e lfa r e
g ra n ts
to
h ig h -in c o m e
fa m ilie s .
For
e x a m p le ,
g ra n ts
a r e m ade t o m o t h e r s a n d c h i l d r e n w i t h o u t r e g a r d
f o r t h e p r e s e n c e o f a w o r k in g
ste p p a re n t
in
th e
hom e.
As
a
r e s u lt,
cash
a s s is ta n c e
is
p r o v id e d
to
f a m i l i e s w h ose t o t a l
a v a i l a b l e i n c o m e i s m o re t h a n a d e q u a t e
to
en su re
th e
f a m i l y 's
su p p o rt.
S im ila r ly ,
cash
a s s is ta n c e
is
o fte n
p r o v id e d
to
f a m i l i e s w h o s e in c o m e w o u ld b e m o re t h a n a d e q u a t e i f
th e
ab sen t
p a r e n ts p a id t h e i r c h ild su p p o rt o b l i g a t i o n s .
C hanges
are
needed
to a s s u r e th a t th e r e s o u r c e s a v a ila b le t o a
f a m ily a r e f u l l y ta k e n i n t o a c c o u n t in d e te r m in in g
th e
f a m i l y 's
need
fo r
a
p u b lic
a s s i s t a n c e c a s h p a y m e n t, t o s t a n d a r d i z e and
s i m p l i f y p r o g r a m r e q u ir e m e n t s and a d m i n i s t r a t i o n (w h ic h w i l l h e l p
redu ce e r r o r s , w a ste ,
and
a b u se ),
to
in c r e a s e
c h ild
su p port
c o lle c tio n s
w h ic h
w ill
red u ce
th e
am ount o f w e l f a r e p a y m e n ts
n e e d e d , a n d t o p r o v i d e a m o re e q u i t a b l e b a l a n c e b e t w e e n t h e S t a t e
and F e d e r a l s h a r e s o f
CSE
c o sts
and
c o lle c tio n s .
The
m a jo r
ch a n g es in c lu d e th e f o llo w in g :

A id

to

F a m ilie s

W ith

D ep en d en t C h ild r e n

C o u n t i n g t h e in c o m e o f a c h i l d ' s s t e p p a r e n t a s a
sou rce
of
su p port
i n d e t e r m i n i n g t h e c h i l d ' s AFDC e l i g i b i l i t y
and b e n e f i t s .
T h e e f f e c t w o u ld b e t o r e d u c e t h e w e l f a r e
b e n e f i t o f o r e v e n d r o p fr o m
th e
w e lfa r e
r o lls
th o se
fa m ilie s
who r e c e i v e c a s h a s s i s t a n c e i n a d d i t i o n t o t h e
a m p le i n c o m e o f t h e
w o r k in g
ste p p a re n t.
T h is
change
w ill
go
a lo n g w ay to w a r d e n s u r i n g t h a t o n l y t h e t r u l y
needy r e c e iv e a s s is t a n c e .
—

C o u n t i n g a f a m i l y ' s e a r n e d in c o m e t a x c r e d i t (E I T C ) o n a
c u r r e n t b a s i s i n d e t e r m i n i n g t h e m o n t h l y AFDC b e n e f i t t o
r e f l e c t b e t t e r th e f a m i l y 's
a c tu a l,
cu rren t
need
fo r




1-11

a s s is ta n c e .
T he
E IT C may now b e c o u n t e d a s a lum p sum
a f t e r y e a r ' s e n d , w h ic h r e s u l t s i n h i g h e r w e l f a r e c o s t s .
T he E IT C now
p r o v id e s
s u b s ta n tia l
in c o m e
su p p ort
—
to ta lin g
$ 1 .9
b illio n
in
1982
—
to
lo w e r -^ in c o m e
fa m ilie s .
The
p rop osed
change
w ill
prevent
th is
a s s i s t a n c e fr o m b e i n g d u p l i c a t e d .
L im itin g d e d u c tib le c h ild ca re c o s t s
and
s ta n d a r d iz in g
o th e r
w o r k - r e l a t e d e x p e n s e s (w h i c h o f f s e t e a r n e d in c o m e
i n d e t e r m i n i n g APDC b e n e f i t s ) a n d r e f o r m i n g o t h e r e a r n e d
in c o m e d i s r e g a r d s .
E a r n e d in c o m e r e d u c e s
th e
f a m i l y 's
need
fo r
w e lfa r e
and
is
s u b t r a c t e d fr o m t h e w e l f a r e
g r a n t e x c e p t t o th e e x te n t o f f s e t by
th e se
d is r e g a r d s .
C u rrent
la w
p r o v id e s
th a t
a f a m i l y m ay o f f s e t e a r n e d
in c o m e b y u n l i m i t e d c h i l d c a r e e x p e n s e s and o t h e r
w ork r e la te d
exp en ses,
and
by
c e r ta in
o th e r
d is r e g a r d s .
O p e n -e n d e d d i s r e g a r d s p e r m i t a d i s p r o p o r t i o n a t e
b e n e fit
fo r
h ig h e r -in c o m e
w o r k in g
fa m ilie s .
W h ile o f f s e t s o f
e a r n e d in c o m e d u e t o w o rk e x p e n s e s a n d c h i l d c a r e
c o sts
e lim in a t e
so m e
w o rk d i s i n c e n t i v e s , t h e y a l l o w f a m i l i e s
w i t h r e l a t i v e l y h i g h in c o m e s t o
r e m a in
on
AFDC.
For
e x a m p le ,
a f a m i l y o f f o u r t h a t r e c e i v e s $ 5 0 0 i n m o n th ly
c a s h b e n e f i t s i f i t h a s n o o t h e r in c o m e c o u l d o f f s e t
an
a d d itio n a l
$500
a
m o n th
in
e a r n in g s by c h a r g in g o f f
l a r g e c h i l d c a r e and o t h e r " w o r k - r e l a t e d e x p e n s e s ."
The
f a m i l y w o u ld t h e n c o n t i n u e
to
r e c e iv e
its
fu ll
$500
m o n th ly
AFDC
g r a n t p l u s i t s $ 5 0 0 m o n th ly e a r n i n g s , f o r
a n a n n u a l t o t a l in c o m e o f $ 1 2 , 0 0 0 .
T h ese
changes
w ill
e s ta b lis h
a
maximum
lim it
on
th e
a llo w a b le
co sts
a s s o c i a t e d w it h e a r n in g in c o m e .
R e q u ir in g
S ta te s
to
d e te r m in e
a
fa m ily ’ s
AFDC
e l i g i b i l i t y a n d b e n e f i t s b a s e d o n p r e v i o u s a c t u a l in c o m e
and c i r c u m s t a n c e s .
M o s t S t a t e s now b a s e e l i g i b i l i t y a n d
b e n e fits
on p r o j e c t i o n s o f a f a m i l y ' s f u t u r e in c o m e a n d
c ir c u m s ta n c e s .
In th e fr e q u e n t in s t a n c e s
w h ere
fa m ily
e s t i m a t e s a r e e i t h e r e r r o n e o u s (a n d f a i l t o b e r e p o r t e d )
or
m is le a d in g ,
s u b s ta n tia l
o v erp a y m e n ts
can b e m ade,
w h ic h m ay r e q u i r e s e v e r a l m o n th s t o c o r r e c t , i f t h e y a r e
d e te c te d a t a l l .
P r o h i b i t i n g AFDC p a y m e n ts b e l o w
$ 1 0 /m o n t h
to
s im p lify
an d
redu ce
th e
co sts
of
a d m in is t r a t io n f o r m a r g in a l
c a s e s t h a t m ay b e o n a n d o f f t h e
r o lls
fr o m
m o n th
to
m o n th .

C h ild

Support

E n fo r c e m e n t

C h a r g i n g an a p p l i c a n t f e e i n n o n -A F D C c a s e s t o r e i m b u r s e
CSE c o s t s o f S t a t e s a n d t h e
F ederal
G o v ern m en t,
w h ic h
have
n o d i r e c t s t a k e i n su c h c a s e s and d o n o t o t h e r w i s e
sh a r e in su ch c o l l e c t i o n s .
T h is p r o p o s a l
w o u ld
en su re
m o re
a d eq u a te
resou rces
fo r
in v e s tig a tio n s
and
c o l l e c t i o n s i n AFDC c a s e s .




1-12

—

F in a n c in g i n c e n t i v e p a y m e n ts o u t o f t h e S t a t e a s w e l l a s
th e F e d e ra l sh a re o f c o l l e c t i o n s .
In th e
case
of
CSE
c o lle c tio n s
f o r AFDC r e c i p i e n t s , t h e F e d e r a l G o v e r n m e n t
and t h e S t a t e s r e c e i v e s h a r e s o f t h e c o l l e c t i o n s i n
th e
sam e
r a tio
th a t
t h e y f i n a n c e AFDC b e n e f i t c o s t s .
CSE
in c e n tiv e
p a y m e n ts,
w h ic h
are
m ade
to
p o litic a l
ju r is d ic tio n s
th a t
c o o p era te
in
m a k in g c h i l d s u p p o r t
c o lle c t io n s fo r o th e r p o l i t i c a l ju r is d ic t io n s ,
are
now
f i n a n c e d e n t i r e l y fr o m t h e F e d e r a l s h a r e o f c o l l e c t i o n s .
S h a r in g
th e
co sts
of
in c e n tiv e s s
in tr o d u c e s g r e a te r
e q u ity
in
th e
s h a r in g
of
CSE
a d m in is tr a tiv e
co sts
b e tw e e n t h e F e d e r a l G overn m en t and t h e S t a t e s .

—

E x t e n d CSE
a c tiv itie s
to
in c lu d e
th e
c o lle c tio n
of
a lim o n y .
In
c e r t a i n S t a t e s , a lim o n y and c h i l d s u p p o r t
p a y m e n ts a r e n o t d i f f e r e n t i a t e d b y
la w
in
th e
absen t
p a r e n t 's
su p p ort
o b lig a tio n .
F in a n c in g th e c o l l e c t i o n
o f c o m b in e d c h i l d s u p p o r t a n d a l i m o n y w i l l i n c r e a s e
CSE
c o lle c tio n s
— a n d c o n s e q u e n t l y r e d u c e AFDC c o s t s — i n
th e se S t a t e s .

—

M a n d a tin g t h a t t h e I n t e r n a l
R evenue
S e r v ic e
in te r c e p t
F ederal
in c o m e
ta x
re tu rn s
to
c o l l e c t c h ild su p p ort
a r r e a r a g e s fr o m l i a b l e
absen t
p a re n ts
w h ere
a
cou rt
ju d g m e n t h a s a l r e a d y b e e n o b t a i n e d .

To a c h ie v e th e s e program
l e g i s l a t i o n t o am end t h e

r e fo r m s , th e P r e s id e n t
S o c ia l S e c u r ity A c t.

w ill

be

p r o p o s in g

As
a
r e s u l t o f t h e s e c h a n g e s , F e d e r a l a n d S t a t e AFDC c o s t s w i l l
d e c l i n e a s m o re o f a f a m i l y ' s a v a i l a b l e r e s o u r c e s a r e t a k e n
in to
a c c o u n t,
and
as
program
a d m in is tr a tio n
is
im p r o v e d .
M o re
in d iv id u a ls
lia b le
fo r
c h ild
su p port
w o u ld
c o n tr ib u te
su ch
s u p p o r t , a n d on a m o re r e g u l a r b a s i s , w i t h a c o n s e q u e n t r e d u c t i o n
in
fa m ilie s '
p u b lic
a s s is ta n c e
n eed s.
B e n e fic ia r ie s
o f CSE
c o l l e c t i o n e f f o r t s i n n o n -A F D C c a s e s w o u ld b e g i n t o b e a r p a r t
of
CSE
c o lle c tio n c o s ts .
F e d e r a l a n d S t a t e CSE c o s t s c o u l d t h e n b e
c o n c e n t r a t e d o n t h o s e c a s e s w h ic h w o u ld r e d u c e t h e p u b l i c w e l f a r e
bu rden.




1-13

T h ese p r o p o s a ls
in fu n d in g :

are

e x p e c te d

to

1981
C u rren t b a s e :
B udget a u t h o r i t y .. . .
O u t l a y s ...................................
P o lic y r e d u c tio n :
B udget a u t h o r i t y .. . .
O u t l a y s ...................................
P rop osed b u d g e t :
B udget a u t h o r i t y .. . .
O u t l a y s ...................................

*

$ 5 0 0 ,0 0 0




or

r e s u lt

in

th e

(in m illio n s
1982
1983

fo llo w in g

o f d o lla r s )
1984
1985

changes

1986

7 ,7 1 9
7 ,8 1 7

6 ,1 5 9
8 ,0 7 9

8 ,2 9 4
8 ,2 9 4

8 ,4 5 7
8 ,4 5 7

8 ,6 6 2
8 ,6 6 2

8 ,8 2 8
8 ,8 2 8

*
*

-5 2 0
-5 2 0

-6 7 0
-6 7 0

-7 2 2
-7 2 2

-7 9 5
-7 9 5

-8 2 4
-8 2 4

7 ,7 1 9
7 ,8 1 7

5 ,6 3 9
7 ,5 5 9

7 ,6 2 4
7 ,6 2 4

7 ,7 3 5
7 ,7 3 5

7 ,8 6 7
7 ,8 6 7

8 ,0 0 4
8 ,0 0 4

le s s .

1-14

Health and Human Services

INCREASING THE CO ST-EFFECTIV E N E SS OF THE MEDICAID

PROGRAM

As h e a lt h c a r e c o s t s have r is e n d r a m a tic a lly
over
th e
la s t
15
years,
th e
c o s t o f m a in ta in in g h e a lt h c a r e e n t it le m e n t b e n e f i t s
has
e s c a la te d
a la r m in g ly .
C o sts
under
fe d e r a lly
su p p o rted
m e d ic a l
a s s is ta n c e
program s
f o r t h e n e e d y h a v e r i s e n fr o m $ 5 . 2
b i l l i o n in
1970
to
over
$29
b illio n
in
th is
fis c a l
year.
C o m b in e d
F ederal
a n d S t a t e e x p e n d i t u r e s f o r m e d i c a i d now e x c e e d
$ 1 ,3 0 0 f o r each e l i g i b l e b e n e f i c i a r y .
F e d e r a l and S t a t e r e g u la t o r y e f f o r t s t o d a t e h a v e f a i l e d t o
ste m
th e
in c r e a s e in c o s t s b e c a u se th e y f a i l t o a f f e c t th e u n d e r ly in g
c o s t -i n c r e a s i n g b i a s in th e h e a lt h c a r e sy ste m t h a t r e s u l t s
fr o m
th e
in s u la tio n
of
a l l p a r t i e s i n m e d i c a l c a r e m a r k e t s fr o m t h e
c o s t con seq u en ces o f t h e ir d e c is io n s .
The
A d m in is tr a tio n
w ill
prop ose
c o m p r e h e n s iv e
le g is la tio n
to
rem ed y
th e se
m arket
d is to r tio n s .
As
an
in te r im
m easu re
p r io r
to
th e
a d o p tio n
of
th e se
A d m in is tr a tio n
in itia tiv e s ,
th e
A d m in is tr a tio n
w ill
p rop ose
le g is la tio n to
e s ta b lis h
a
lim it
on
th e
m e d ic a id
p r o g r a m 's
u n c o n s tr a in e d
g ro w th .
As p a r t o f t h i s p r o p o s a l, F e d e r a l program
r e q u i r e m e n t s w o u ld b e m o d i f i e d t o a l l o w
S ta te s
to
am end
th e ir
presen t
program s
t o e n su re t h a t e s s e n t i a l s e r v i c e s a r e p r o v id e d
t o n e e d y f a m i l i e s in a t i m e ly and c o s t - e f f e c t i v e m a n n er.
T h e m e d i c a i d p r o g r a m h a s b e e n g r o w i n g f a s t e r t h a n 15% a y e a r
fo r
th e
p a s t 5 y e a r s , a n d t h e F e d e r a l G o v e r n m e n t now p a y s 50% t o 78%
o f e a c h S t a t e 's m e d ic a id e x p e n d it u r e s .
H ig h
F ederal
m a tc h in g ,
e x c e s s iv e
b e n e fit
p r o v is io n s ,
and
o v e r ly -g e n e r o u s e l i g i b i l i t y
h a v e m ade t h e m e d i c a i d
program
a
very
p o o r ly
m anaged
s o c ia l
program
th a t
fa ils
t o p r o v id e c o s t - e f f e c t i v e s e r v i c e s t o th o s e
m ost
in
need.
E lig ib ility
errors
a lo n e ,
fo r
e x a m p le ,
are
c u r r e n tly
e s tim a te d
to
cost
F ederal
and
S ta te
g o v e rn m e n ts
a p p r o x im a te ly $ 1 .2 b i l l i o n p e r y e a r .
B eca u se under th e
in te r im
cap
F ederal
e x p e n d itu r e s
w o u ld
no
lo n g e r
b e o p e n - e n d e d . S t a t e s w o u ld h a v e a d d i t i o n a l i n c e n t i v e s t o
redu ce
fr a u d ,
w a ste ,
and
ab u se
in
th is
S t a t e -a d m in is t e r e d
program .
In
a d d i t i o n , t h e new f l e x i b i l i t y g r a n t e d S t a t e s w o u ld
e n a b l e th e m t o r e o r g a n i z e t h e i r p r o g r a m s
to
d e liv e r
care
m o re
e f f e c t i v e l y and a t lo w e r c o s t .
T h e l i m i t w o u ld b e s t r u c t u r e d t o r e d u c e F e d e r a l e x p e n d i t u r e s $ 1 0 0
m illio n
b e lo w
th e
cu rren t
base
e s tim a te
in
1981.
F ederal
e x p e n d i t u r e s w o u ld b e a l l o w e d t o
in c r e a s e
5%
in
1982.
A fte r
1 9 8 2 , F e d e r a l s p e n d i n g w o u ld r i s e o n l y w i t h t h e r a t e o f i n f l a t i o n
as
m easu red
by
th e
GNP d e f l a t o r .
The A d m in is t r a t io n b e l i e v e s
t h is degree o f
r e s tr a in t
can
be
a c h ie v e d
by
S ta te s
w ith o u t
r e d u c in g
b a s i c s e r v i c e s f o r th e m ost n e e d y .
The 1 9 8 2 r e d u c t io n ,
fo r
e x a m p le ,
is
o n ly
about
3%
of
p r o je c te d
F e d e r a l/S t a t e




1-15

s p e n d in g .
In
th e 1 9 8 3 -8 6 p e r io d , th e A d m in is tr a tio n e x p e c ts to
i n s t i t u t e c o m p r e h e n s iv e h e a l t h f i n a n c i n g and m e d ic a id r e fo r m s
to
r e d u c e t h e r a t e o f h e a l t h c o s t i n f l a t i o n and t o im p r o v e m e d i c a i d .
D u r in g t h e i n t e r i m p e r i o d , F e d e r a l e x p e n d i t u r e s w i l l b e a l l o c a t e d
am ong
S ta te s
so
th a t
each
S ta te
w ill
m a in ta in
it s curren t
r e l a t i v e s h a r e o f t o t a l m e d ic a id s p e n d in g .
U n d e r t h e A d m i n i s t r a t i o n p r o p o s a l , S t a t e s w o u ld n o t b e f o r c e d
to
s h o u ld e r
u n r e a s o n a b le .a d d i t i o n a l
bu rd en s.
L e g is la t iv e changes
w o u ld b e s o u g h t t o e n s u r e t h a t S t a t e s
have
th e
fle x ib ility
to
am end
q u ic k ly
t h e e l i g i b i l i t y , b e n e f i t s , and p aym en t p r o v i s i o n s
o f t h e i r S t a t e m e d ic a id p la n s s o as t o a llo w
th em
to
m eet
th e
e s s e n tia l
h e a lth
care
n e e d s o f t h e i r n e e d y c i t i z e n s a t a lo w e r
co st.
U nder c u r r e n t
la w ,
e x c e s s iv e
F ederal
m a n d a tes
are
an
o b s ta c le
to
cost
c o n tr o l.
T he
A d m i n i s t r a t i o n p r o p o s a l w o u ld
e n su re t h a t S t a t e s had th e a u t h o r it y t o
r e o r ie n t
th e ir
program
q u ic k ly
to w a rd
e s s e n tia l
s e r v ic e s
to
th o s e m ost in n e e d .
No
S ta te ,
how ever,
w o u ld
be
p rev e n ted
fr o m
p r o v id in g
w h a tev e r
a d d itio n a l
se r v ic e s
it
d eem ed
a p p r o p r ia te
out
of
its
own
resou rces.
The p r o p o s a l
fu n d in g :

is

e x p e c te d

to

r e s u lt

1981
C u rren t b a s e :
B udget a u t h o r i t y .. . .
P o lic y r e d u c tio n :
Budget a u t h o r i t y ..
O u t l a y s ..............................
P rop osed b u d g e t:
Budget a u t h o r i t y .. . .
O u t l a y s ..............................




in

th e

fo llo w in g

(in m illio n s
1982
1983

changes

o f d o lla r s )
1984
1985

in

1986

1 7 ,2 6 4

1 8 ,8 3 0
1 8 ,2 1 3

2 0 ,9 4 3
2 0 ,4 4 1

2 3 ,0 2 4
2 2 ,5 2 9

2 5 ,1 0 6
2 4 ,5 9 3

2 7 ,2 9 0
2 6 ,7 3 2

-3 5 3

-1 ,2 3 7
-1 ,0 1 3

-2 ,2 1 3
-1 ,9 8 6

-3 ,1 6 6
-2 ,9 3 0

-4 ,1 8 1
-3 ,9 1 6

-5 ,3 1 8
-5 ,0 2 1

1 6 ,9 1 1

1 7 ,5 9 3
1 7 ,2 0 0

1 8 ,7 3 0
1 8 ,4 5 5

1 9 ,8 5 8
1 9 ,5 9 9

2 0 ,9 2 5
2 0 ,6 7 7

2 1 ,9 7 2
2 1 ,7 1 1

1-16

Housing and Urban Development

REDUCED LEVEL OF ADDITIONAL

SU B SID IZE D

HOUSING

As p a r t o f
th e
gen eral
e ffo r t
to
c o n tro l
lo n g -te r m
F ederal
govern m en t
s p e n d in g
and t h e r e b y e l i m i n a t e i n f l a t i o n and p r o m o te
e c o n o m ic g r o w th , t h e A d m i n i s t r a t i o n w i l l p r o p o s e
to
red u ce
th e
p la n n e d
n u m b er o f a d d i t i o n a l s u b s i d i z e d h o u s i n g u n i t s i n 1 9 8 2 b y
1 3 % , fr o m
2 6 0 ,0 0 0
to
2 2 5 ,0 0 0
u n its .
To
p e r m it
an
o r d e r ly
t r a n s i t i o n t o t h i s lo w e r 1 9 8 2 l e v e l , t h e A d m i n i s t r a t i o n w i l l a l s o
p rop ose
a r e d u c tio n in th e 1981 p rogram .
A f t e r th e r e d u c tio n i s
t a k e n i n t o a c c o u n t , t h e A d m i n i s t r a t i o n 's 1 9 8 2 s u b s i d i z e d
h o u s in g
program
w i l l s t i l l p r o v i d e a 8 .4 % i n c r e a s e a b o v e t h e a c t u a l 1 9 8 0
program l e v e l ( 2 0 6 ,0 0 0 u n it s ) o f th e p r e v io u s a d m in is t r a t io n .
T h e r e h a s b e e n m o u n tin g c o n c e r n o v e r t h e p a s t s e v e r a l y e a r s
over
th e
g r o w in g
per
u n it
co sts
and
e c o n o m i c e f f i c i e n c y o f H U D 's
s u b s id iz e d h o u s in g p rog ram .
A
1982
program
le v e l
of
2 2 5 ,0 0 0
u n its
add resses
th e se
con cern s
b u t a l l o w s c o n t in u e d g ro w th o f
s u b s id iz e d h o u s in g .
It
s h o u ld
be
n o ted
th a t
th e
s u b s id iz e d
h o u s in g
program
h as a ls o been c r i t i c i z e d as in e q u ita b le b e ca u se
i t p r o v id e s v e ry deep s u b s id ie s to le s s
th a n
9%
of
th e
to ta l
e l i g i b l e h o u s e h o ld s w h ile th e r e s t c u r r e n t ly r e c e i v e no s u b s i d i e s
at a l l .
To
a c h ie v e
th is
p o lic y
change,
th e
P r e s id e n t w i l l p ro p o se a
d e fe r r a l o f
$ 1 .3
b illio n
in
1981
budget
a u th o r ity
fo r
th e
D e p a r tm e n t
o f H o u s i n g a n d U rb a n D e v e l o p m e n t 's s u b s i d i z e d h o u s i n g
program .
T he am ount o f b u d g e t a u t h o r i t y d e f e r r e d
w ill
th e n
be
u sed
to
fu r th e r redu ce th e b u d get a u th o r ity needed to su p p o rt a
2 2 5 ,0 0 0 u n it p rogram l e v e l in 1 9 8 2 .
T h is p r o p o s a l
fu n d in g :




is

e x p e c te d

to

r e s u lt

1-17

in

th e

fo llo w in g

changes

in

1981
C u rren t b ase 1 / :
B udget a u t h o r it y . .
O u t l a y s ..............................
P o lic y r e d u c tio n :
B udget a u t h o r i t y ..
O u t l a y s ... ....................... ..
P rop osed b u d g et
:
B udget a u t h o r i t y ..
O u t l a y s ..............................

(in m illio n s
1982
1983

o f d o lla r s )
1934
1985

1986

2 9 .5 0 2
5 ,6 3 7

2 7 ,1 2 3
6 ,8 9 4

2 8 ,4 6 4
7 ,9 0 1

3 0 ,3 5 4
9 ,1 8 6

3 1 ,6 6 0
1 0 ,3 6 4

3 3 ,3 4 3
1 1 ,4 6 4

------1

-3 ,5 3 6
-1 0

-3 ,0 2 6
-3 9

-3 ,4 4 0
-9 5

-3 ,4 3 7
-2 2 3

-3 ,6 2 4
-3 7 1

2 9 .5 0 2
5 ,6 3 6

2 3 ,5 8 7
6 ,8 8 4

2 5 ,4 3 8
7 ,8 6 2

2 6 ,9 1 4
9 ,0 9 1

2 8 ,2 2 3
1 0 ,1 4 1

2 9 ,7 1 9
1 1 ,0 9 3

1/
T he
b a s e n u m b e r s a s s u m e t h e e n a c t m e n t o f an i n c r e a s e i n
maximum s u b s i d i z e d h o u s i n g r e n t c o n t r i b u t i o n s fr o m 25% t o 30%
of
a d ju s te d
t e n a n t in c o m e .
(S e e s e p a r a t e f a c t s h e e t on t e n a n t r e n t
b u r d e n .)
2 / T h e R e a g a n b u d g e t t o t a l s i n c l u d e t h e c o m b in e d e f f e c t s
of
in c r e a s in g
t e n a n t r e n t c o n t r i b u t i o n s and r e d u c in g t h e s u b s i d i z e d
h o u s in g program l e v e l .




1-18

Housing and Urban Development

INCREASED RENT CONTRIBUTIONS FOR SU B SID IZE D

HOUSING TENANTS

The A d m in is t r a t io n p r o p o s e s t o
g r a d u a lly
in c r e a s e
a llo w a b le
rent
c o n t r ib u t io n p a id b y te n a n ts l i v i n g
s u b s i d i z e d h o u s i n g fr o m 25% t o 30% o f t h e i r a d j u s t e d

th e
maximum
in f e d e r a lly
in c o m e s .

A s i m i l a r , m o re l i m i t e d p r o p o s a l p a s s e d t h e C o n g r e s s i n 1 9 7 9
but
th e
a u t h o r it y has n o t been u t i l i z e d .
U nder c u r r e n t r e g u l a t i o n s ,
t e n a n ts l i v i n g in s e c t io n 8 s u b s id iz e d h o u s in g ,
p u b lic
h o u s in g ,
and
o th e r
HUD
s u b s id iz e d
u n its
t h u s p a y n o t m o r e t h a n 25% o f
t h e ir a d ju s te d
in c o m e s
to w a r d
re n t.
The
F ederal
govern m en t
s u b s id iz e s
th e d i f f e r e n c e b e tw e e n t h e a c t u a l m a rk e t r e n t c h a r g e d
f o r th e u n it ( o r , in th e c a s e o f p u b lic
h o u s in g ,
th e
per
u n it
o p e r a t in g c o s t ) and th e t e n a n t 's r e n t c o n t r i b u t i o n .
M any p o o r p e o p l e d o n o t l i v e i n s u b s i d i z e d h o u s i n g ; a n d m o re t h a n
13
m illio n
re n ters
at
a l l l e v e l s o f in c o m e h a v e b e e n p a y i n g a
g r e a t e r p e r c e n t a g e o f t h e i r in c o m e s f o r
ren t
in
recen t
years.
T h is
in c r e a s e
in
t e n a n t r e n t c o n t r i b u t i o n s w i l l r e d u c e so m e o f
t h e i n e q u i t y o f p r o v i d i n g v e r y l a r g e s u b s i d i e s t o l e s s t h a n 9% o f
t h e t o t a l e l i g i b l e h o u s e h o ld s w h ile th e r e s t c u r r e n t l y r e c e i v e no
s u b s id ie s at a l l .
But even a f t e r th e
gradu al
p h a s e -in
of
th e
in c r e a s e
in
t e n a n t r e n t c o n t r i b u t i o n s i s c o m p le te d in 1 9 8 6 , th e
3 .3 m i l l i o n h o u s e h o ld s c u r r e n t ly
liv in g
in
s u b s id iz e d
h o u s in g
w ill
c o n tin u e
to
p a y o n t h e a v e r a g e a much l o w e r p e r c e n t a g e o f
t h e i r in c o m e s f o r b e t t e r h o u s i n g t h a n t h e 3 5 m i l l i o n l o w e r in c o m e
h o u s e h o l d s who l i v e i n u n s u b s i d i z e d
h o u s in g .
It
is
e stim a te d
th a t
th e
in c r e a s e d
r e n t paym ent f o r s u b s id iz e d t e n a n ts in 1 9 8 2
w i l l a v e r a g e l e s s t h a n $ 5 p e r m o n th .
C u r r e n t ly , v e r y n eed y h o u s e h o ld s
pay
le s s
th a n
25%
of
th e ir
in c o m e s
f o r r e n t i n HUD s u b s i d i z e d h o u s i n g p r o j e c t s .
S in c e t h i s
p r o p o s a l p r o v i d e s f o r t h e sa m e r a t e o f i n c r e a s e f o r a l l
te n a n ts,
th e
d iffe r e n tia l
fo r
th e v e r y n eed y w i l l b e m a in ta in e d f o r th e
next 5 years.
T o a c h i e v e t h i s p o l i c y c h a n g e , HUD w i l l i m p le m e n t
th e
a u th o r ity
it
a l r e a d y h a s t o i n c r e a s e t e n a n t r e n t c o n t r i b u t i o n s fr o m 25% t o
30% f o r new t e n a n t s w i t h in c o m e s a b o v e 50% o f a r e a m e d ia n i n c o m e .
The P r e s id e n t w i l l p r o p o s e th e l e g i s l a t i o n r e q u ir e d t o a p p ly
th e
rent
b u rd en
in c r e a s e s
to
c u r r e n t t e n a n t s a n d new t e n a n t s w i t h
i n c o m e s b e l o w 50% o f a r e a m e d ia n i n c o m e .
The r e n t i n c r e a s e
fr o m
25%
to
30% o f in c o m e w i l l b e p h a s e d - i n a t 1% o f in c o m e p e r y e a r
o v e r th e n e x t 5 y e a r s .




1-19

The p r o p o s a l
fu n d in g :

is

e x p e c te d

to

r e s u lt

1981
C u rrent b a se l / :
B udget a u t h o r i t y . . .
O u t l a y s .......................... .. .
P o lic y r e d u c tio n 2 / :
B udget a u t h o r i t y .. .
O u t l a y s ................................
P rop osed b u d g e t:
Budget a u t h o r i t y .. .
O u t l a y s ................................

in

th e

fo llo w in g

( in m i ll i o n s
1983
1982

changes

in

o f d o lla r s )
1985
1984

1986

.
.

2 8 ,9 7 3
6 ,5 7 1

3 2 ,0 4 4
8 ,1 7 7

3 3 ,1 9 7
9 ,7 2 9

3 6 ,0 3 1
1 1 ,5 4 0

3 7 ,7 1 9
1 3 ,3 6 0

3 9 ,6 1 1
1 5 ,1 0 6

-5 0 0
-9

.
.

-4 ,9 1 6
-2 3 2

-4 ,5 7 4
-5 3 8

-5 ,5 8 7
-1 ,0 1 8

—6 , 0 6 6
-1 ,7 4 8

-6 ,2 6 9
-2 ,4 4 5

2 8 ,4 7 3
6 ,5 6 2

2 7 ,1 2 8
7 ,9 4 5

2 8 ,6 2 3
9 ,1 9 1

3 0 ,4 4 4
1 0 ,5 2 2

3 1 ,6 5 3
1 1 ,6 1 2

3 3 ,3 4 2
1 2 ,6 6 1

1/
C o m b in e d
to ta ls
fo r
su b s id iz e d
and
p u b lic
h o u s in g
o p e r a tin g
s u b s id y
program s,
e x c lu d in g
p u b lic
h o u s in g
m o d e r n iz a tio n .
2/
R e f l e c t s n o t o n l y t h e im p a c t o f r e n t i n c r e a s e s , b u t a l s o
t h e n e t e f f e c t o f r e s c i s s i o n s and s u p p l e m e n t a l s i n 1 9 8 1 a n d 1 9 8 2 .




1-20

Housing and Urban Development

EXTENSION OF TIMETABLE FOR COMPLETING
PUBLIC HOUSING MODERNIZATION

The p u b l i c h o u s in g
m o d e r n iz a tio n
program
is
a
p u b lic
se cto r
c a p ita l
in v e s tm e n t
a c tiv ity
w ith
lo n g -te r m
b e n e fits .
The
c o m p r e h e n s iv e m o d e r n iz a t io n e f f o r t f o r p u b l i c h o u s in g
a u th o r iz e d
by
th e
C on gress
la s t
year
s h o u ld h e l p e n s u r e t h a t a l l p u b l i c
h o u s i n g p r o j e c t s m e e t m inim um h e a l t h a n d s a f e t y s t a n d a r d s a n d a r e
m ade
m ore
en ergy
e ffic ie n t
and
le s s
c o s tly
to
o p e ra te .
S tr e tc h in g
out
th is
program
is
p a r t o f t h i s A d m i n i s t r a t i o n 's
o v e r a l l s t r a t e g y t o im p ro v e t h e p e r fo r m a n c e o f t h e U .S .
econom y.
The
o r ig in a l
c o n g r e s s io n a l
fu n d in g
fo r
th e
program
w as
so
a m b itio u s t h a t i t i s q u e s t io n a b le w h eth e r th e
fu n d s
c o u ld
have
b een u sed e f f e c t i v e l y in any c a s e .
An i m p r o v e d U . S . e c o n o m y w i l l
r e d u c e i n f l a t i o n - c a u s e d i n c r e a s e s i n t h e c o s t o f o p e r a t i n g .p u b l i c
h o u s in g
and
m ost
of
th e b a s i c o b j e c t i v e s o f th e c o m p r e h e n s iv e
m o d e r n iz a t io n p rogram w i l l b e a c c o m p lis h e d b y 1 9 8 5 o r 1 9 9 6 .
T he s t r e t c h o u t o f c o n s t r u c t i o n and r e n o v a t i o n a c t i v i t y
w ill
be
a c h ie v e d
by c a r r y in g o v er $ 300 m i lli o n o f th e 1981 a p p r o p r ia tio n
i n t o 1 9 8 2 , an d r e d u c i n g t h e 1 9 8 2 a n d
fu tu r e
year
a p p r o p r ia tio n
le v e l by 40% .

The
1981
a p p r o p r ia tio n
l a n g u a g e f o r t h e HUD s u b s i d i z e d h o u s i n g
p r o g r a m s w i l l h a v e t o b e am en d ed s l i g h t l y t o p e r m i t $ 3 0 0
m illio n
of
th e
$ 2 .0
b illio n
in
b u d g et a u t h o r it y earm arked f o r p u b lic
h o u s in g in th e 198 1 a p p r o p r ia t io n a c t t o b e d e f e r r e d u n t i l
1982.
T h is
$ 3 0 0 m i l l i o n d e f e r r a l p l u s a n a m en d ed 1 9 8 2 a p p r o p r i a t i o n o f
$ 1 .2 b i l l i o n w i l l su p p o rt a t o t a l
1982
program
le v e l
of
$ 1 .5
b i l l i o n fo r m o d e r n iz a tio n .
The
prop osal
fu n d in g :

is

e x p e c te d

to

1981
C u rren t b a s e :
Budget a u t h o r i t y ....
P r o g r a m l e v e l ..................
O u t l a y s ...................................
P o lic y r e d u c tio n :
B udget a u t h o r i t y ....
P r o g r a m l e v e l ..................
O u t l a y s ....................................
P rop osed b u d g e t:
Budget a u t h o r i t y ....
P r o g r a m l e v e l ............ ..
O u t l a y s ....................................

*

D e fe r r a l.




r e s u lt

in

th e

(in m illio n s
1982
1983

fo llo w in g

changes

o f d o lla r s )
1984
1985

in

1986

2 ,0 0 0
2 ,0 0 0
246

2 ,0 0 0
2 ,0 0 0
296

2 ,0 0 0
2 ,0 0 0
371

2 ,0 0 0
2 ,0 0 0
471

2 ,0 0 0
2 ,0 0 0
571

2 ,0 0 0
2 ,0 0 0
671

(-3 0 0 )
-3 0 0
........

-8 0 0
-5 0 0

-8 0 0
-8 0 0

-8 0 0
-8 0 0
-2 0

-8 0 0
-8 0 0
-6 0

-8 0 0
-8 0 0
-1 0 0

2 ,0 0 0
1 ,7 0 0
246

1 ,2 0 0
1 , 500
296

1 , 200
1 , 200
371

1, 200
1 ,2 0 0
451

1 , 200
1 ,2 0 0
511

1, 200
1 ,2 0 0
571

Department of Labor

TARGETING UNEMPLOYMENT INSURANCE EXTENDED BENEFITS ON
STATES WITH HIGH UNEMPLOYMENT

In o rd e r to p rev e n t
h a r d s h ip
in
areas
w h ere
h ig h
le v e ls
of
u n e m p lo y m e n t
m ake new j o b s d i f f i c u l t t o f i n d f o r m any u n e m p lo y e d
w o r k e r s , th e F e d e r a l G overn m en t a s s i s t s t h e S t a t e s
in
p r o v id in g
an
a d d itio n a l
13
w eeks
of
u n e m p lo y m e n t
in s u r a n c e
b e n e fits
("e x te n d e d b e n e f i t s " ) beyond
th e
b a s ic
26
w eeks
of
coverage
p r o v id e d
by b a s ic S t a te p rogram s.
T h ese a d d i t i o n a l b e n e f i t s a re
t r i g g e r e d w hen a
S ta te ’ s
ra te
of
u n e m p lo y m e n t
am ong
in s u r e d
w ork ers
reach es
4%
fo r
13
w e e k s , i f t h e r a t e i s a t l e a s t 20%
a b o v e t h e r a t e f o r t h e sam e p e r i o d i n e a c h o f t h e p r i o r 2
years.
S t a t e s may (a n d m any d o ) p r o v i d e t h e s e e x t e n d e d b e n e f i t s w hen t h e
S t a t e 's
ra te
r e a c h e s 5% f o r 13 w e e k s , r e g a r d l e s s o f t h e r a t e i n
th e
p r io r
2
years.
W hen
th e
n a tio n a l
ra te
of
in s u r e d
u n e m p lo y m e n t r e a c h e s 4 . 5 % , t h e e x t e n d e d b e n e f i t s p r o g r a m t r i g g e r s
on i n a l l 50 S t a t e s .
S t r u c t u r a l s h i f t s i n t h e U . S . e co n o m y o v e r t h e l a s t 15 y e a r s h a v e
produced
s ig n ific a n t
r e g io n a l
d iffe r e n tia ls
in
u n e m p lo y m e n t
r a t e s , r e g a r d l e s s o f g e n e r a l e c o n o m ic c o n d i t i o n s .
For
e x a m p le ,
i n t h e d e p t h o f t h e 1 9 7 4 - 7 5 r e c e s s i o n , i n s u r e d u n e m p lo y m e n t r a t e s
ran ged
fr o m
a
h ig h
of
1 3 .2 %
i n M i c h i g a n t o a lo w o f 2 .7 % i n
T exas.
T o d a y , w h i l e i n s u r e d u n e m p lo y m e n t i s i n t o l e r a b l y h i g h
in
th e
i n d u s t r i a l N o r t h e a s t and M id w e s t, in s u r e d r a t e s r e m a in b e lo w
2% i n a nu m ber o f s u n b e l t S t a t e s .
The r e s u l t i s t h a t t h e n a t i o n a l
tr ig g e r
fo r
ex ten d e d
b e n e fits
o fte n
p r o v id e s
e x ten d e d
b e n e fit
p a y m e n ts
to w ork ers in t ig h t
la b o r m a rk e ts w h en ev er th e n a t i o n a l t r i g g e r i s
"o n ".
O ver
an d
above
th e
u n n ecessary
co sts
a s s o c ia te d
w ith
th e
a d d itio n a l
b e n e f i t s , p r o v i d i n g l o n g - t e r m b e n e f i t s t o u n e m p lo y e d
w ork ers
in
m a rk e ts
w h ere
la b o r
is
in
sh ort
s u p p ly
a c t u a lly a g g ra v a tes
u n e m p lo y m e n t i n t h e s e
areas
by
p r o v id in g
a
d is in c e n tiv e
fo r
u n e m p lo y e d
w ork ers
to
seek
o th e r
jo b s .
In
a d d itio n t o th e
h a r m fu l e f f e c t s o f p r o v id in g e x te n d e d b e n e f i t s in
areas
of
lo w
u n e m p lo y m e n t ,
t h e p r e s e n t e x t e n d e d b e n e f i t s p r o g r a m s u f f e r s fr o m
t e c h n i c a l f l a w s t h a t m ake
it
u n r e s p o n s iv e
to
c h a n g in g
n eed s•
U n d er p r e s e n t la w , r e c i p i e n t s o f e x te n d e d b e n e f i t s a r e c o u n te d in
c a lc u la tin g
th e
in s u r e d
u n e m p lo y m e n t r a t e s .
S e v e r a l a n o m a lie s
h a v e r e s u l t e d fr o m t h i s m e th o d o f c a l c u l a t i o n .
The
paym ent
of
e x ten d e d
b e n e fits
m ay
be
d e la y e d
w hen
u n e m p lo y m e n t
r is e s .
E x t e n d e d b e n e f i t s may b e p a i d i n o n e
S ta te
fo r
several
m o n th s
w h ile
th e y
are
not
p a id
in
a se co n d S t a t e w ith an i d e n t i c a l
o v e r a l l u n e m p lo y m e n t r a t e .
E x te n d e d b e n e f i t s c o n t i n u e t o b e p a id
w h en o v e r a l l u n e m p lo y m e n t i s l e s s t h a n
it
w as
w hen
th e
e x tra
p a y m e n ts s t a r t e d .
To
re m e d y
th e se
p r o b le m s ,
th e
r e c a li b r a t e th e e x ten d e d
b e n e fits
e x ten d e d
b e n e fit
p a y m e n ts
o n ly




1-22

A d m in is tr a tio n
p rop oses
to
program
in
order
to
fo c u s
on
th o se
areas
w h ere
h ig h

u n e m p lo y m e n t p r o v i d e s a r e a l b a r r i e r t o e m p lo y m e n t f o r u n e m p lo y e d
w ork ers.
L e g i s l a t i o n w i l l b e p r o p o se d t o a c c o m p lis h t h i s program
r e o r ie n ta tio n .
The
le g is la tio n
w o u ld :
(1 ) e lim in a te
th e
n a t i o n a l e x t e n d e d b e n e f i t s p r o g r a m , w h ic h now r e q u i r e s p a y m e n t o f
e x ten d e d
b e n e fits
in
a ll
S ta te s
—
i n c l u d i n g t h o s e w i t h lo w
u n e m p lo y m e n t —
w hen
th e
n a tio n a l
in s u r e d
u n e m p lo y m e n t
ra te
reach es
th e
le v e l
s e t b y la w ; ( 2 ) rem ov e c la i m a n t s o f e x t e n d e d
b e n e f i t s fr o m t h e c a l c u l a t i o n o f t h e i n s u r e d
u n e m p lo y m e n t
ra te ,
w h ic h
d e te r m in e s
when e x t e n d e d b e n e f i t s a r e p a i d i n e a c h S t a t e ;
and (3 ) r e q u ir e a h ig h e r
le v e l
of
u n e m p lo y m e n t
in
in d iv id u a l
S ta te s
b e fo r e
ex ten d e d b e n e f i t s a re p a id .
I n a d d i t i o n , t h e new
re q u ir e m e n t in th e 1 9 8 0 R e c o n c ili a t i o n A c t t h a t e x te n d e d b e n e f i t s
c l a i m a n t s m u st a c c e p t o f f e r s o f j o b s t h a t p a y an am ount e q u a l
to
th e ir
UI
b e n e fits
( a t l e a s t t h e m inim um w a g e ) w i l l b e s t r i c t l y
e n fo r c e d .
T h e A d m i n i s t r a t i o n p r o p o s a l w o u ld e l i m i n a t e t h e n a t i o n a l
tr ig g e r
and
change
th e
m e th o d
o f c a l c u l a t i n g t h e i n s u r e d u n e m p lo y m e n t
r a t e e f f e c t i v e J u ly 1 , 1 9 8 1 .
The p r o p o s a l
w o u ld
a ls o
in c r e a s e
th e
S ta te
t r i g g e r r a t e s t o 5% i n s u r e d u n e m p lo y m e n t (a n d 120% o f
t h e r a t e i n t h e c o m p a r a b le p e r i o d o f t h e p r i o r 2
years)
or,
at
S ta te
o p tio n ,
t o 6% ( w i t h o u t r e g a r d t o p r i o r y e a r s ) .
To p e r m it
n e c e s s a r y c h a n g e s in S t a t e la w , t h e
in c r e a se
in
S ta te
tr ig g e r
r a t e s w o u ld t a k e e f f e c t O c t o b e r 1 , 1 9 8 2 .
The
p rop osal
fu n d in g :

is

e x p e c te d

to

1981
C u rren t b a s e :
B udget a u t h o r i t y ..

NOTE:
T o ta l
a u th o r ity
fo r
id e n tifia b le .




UI
UI

in

th e

(in m illio n s
1983
1982

fo llo w in g

changes

in

o f d o lla r s )
1985
1984

1986

.

2 0 ,1 1 3

2 3 ,2 7 9
2 ,4 8 3

2 3 ,9 3 8
837

2 4 ,1 3 3
543

2 3 ,0 2 9
423

2 3 ,1 2 6
338

-4 0 0

.

P o lic y r e d u c tio n :
B udget a u t h o r i t y ..
P rop osed b u d g e t:
B udget a u t h o r i t y ..

r e s u lt

-7 0 0
-1 ,2 3 1

-7 0 0
-4 7 7

-1 0 0
-1 9 6

-1 0 0
-2 8 4

-2 0 0
-2 8 7

1 9 ,7 1 3

2 2 ,5 7 9
1 ,2 5 2

2 3 ,2 3 8
360

2 4 ,0 3 3
347

2 2 ,9 2 9
139

2 2 ,9 2 6
51

bu dget a u th o r ity
is
e x ten d e d
b e n e fits

1-23

sh o w n
is

becau se
budget
not
s e p a r a te ly

Department of Labor

STOPPING UNEMPLOYMENT INSURANCE PAYMENTS
TO PEOPLE WHO WILL NOT TAKE OTHER JOBS

T h e p u r p o s e o f t h e u n e m p lo y m e n t i n s u r a n c e s y s t e m i s t o p r o v i d e
a
c u s h io n
fo r
w ork ers
d u r in g
te m p o ra ry ,
in v o lu n ta r y p e r io d s o f
u n e m p lo y m e n t, a n d t o e n s u r e t h a t u n e m p lo y e d w o r k e r s h a v e a d e q u a t e
re so u rc e s to search fo r a lte r n a te
e m p lo y m e n t
co m m en su ra te
w ith
th e ir
s k i l l s and a b i l i t i e s .
R e g u l a r u n e m p lo y m e n t i n s u r a n c e ( U I )
b e n e f i t s a r e p a y a b l e f o r up t o 26 w e e k s i n m o s t S t a t e s .
E x te n d e d
b e n e f i t s , a v a i l a b l e d u r i n g h i g h u n e m p lo y m e n t
p e r io d s ,
ad d
h a lf
a g a in
as
many
w eeks
t o a c l a i m a n t ' s e l i g i b i l i t y f o r a maximum
( r e g u l a r p lu s e x t e n d e d ) t o t a l o f 39 w e e k s .
E c o n o m ic e v e n t s o f t h e
p ast
decade
have
produced
s ig n ific a n t
str u c tu r a l
s h ifts
i n t h e A m e r ic a n e c o n o m y , w i t h e m p lo y m e n t i n a
nu m ber o f m a jo r i n d u s t r i e s d e c l i n i n g w h i l e n e w e r i n d u s t r i e s g r o w .
T h e s e s h i f t s h a v e p r o d u c e d m a jo r c h a l l e n g e s f o r A m e r ic a n
w ork ers
as
th e y
seek
to
a d ju s t
t o c h a n g i n g e m p lo y m e n t p a t t e r n s .
The
p r e s e n t u n e m p lo y m e n t i n s u r a n c e la w s
e x a c e rb a te
th e se
p r o b le m s .
By
a llo w in g
w ork ers
to
d ra w
up
to
6 m o n th s o f u n e m p lo y m e n t
in s u r a n c e
b e n e fits
u n le s s
jo b s
in
th e ir
o c c u p a tio n s
are
a v a i l a b l e , t h e u n e m p lo y m e n t i n s u r a n c e s y s t e m a c t u a l l y d i s c o u r a g e s
w ork ers
fr o m
s e e k in g
e m p lo y m e n t i n new i n d u s t r i e s w h i c h , w h i l e
t h e y p a y lo w e r w a g es i n i t i a l l y ,
h o ld
th e
prosp ect
of
g r o w in g
e m p lo y m e n t a n d new c a r e e r s .
In
o r d e r t o rem ed y t h i s p r o b le m , t h e A d m i n i s t r a t i o n w i l l p r o p o s e
l e g i s l a t i o n r e q u i r i n g w o r k e r s who h a v e
been
u n e m p lo y e d
fo r
at
le a s t
3
m o n th s
t o s e e k e m p lo y m e n t t h a t p r o v i d e s w a g e s a t l e a s t
e q u a l t o t h e i r u n e m p lo y m e n t
in s u r a n c e
b e n e fit
am ou n t
and
th e
m inim um w a g e .
T h o s e d r a w in g t h e i r f i r s t 13 w e e k s o f u n e m p lo y m e n t
b e n e fits ,
h ow ever,
w o u ld
be
a llo w e d t o c o n tin u e t o s e a r c h f o r
w o rk i n t h e i r c u s t o m a r y a r e a s a t p r e v a i l i n g w a g e s .
U n d e r c u r r e n t l a w , t h o s e who r e f u s e t o a c c e p t s u i t a b l e
w o rk
are
d e n i e d UI b e n e f i t s .
H o w e v e r , s u i t a b l e w o rk i s u s u a l l y d e f i n e d a s
a
jo b
s im ila r
to
th e
c l a i m a n t 's
p r e v io u s
e m p lo y m e n t .
The
p r o p o s a l w o u ld a p p l y t o a l l r e g u l a r UI c l a i m a n t s , a f t e r 1 3
w eeks
of
b e n e fits ,
th e
d e fin itio n
of
s u ita b le
w o rk
th a t th e 1980
R e c o n c ili a t i o n A c t r e q u ir e s be a p p lie d t o
a ll
e x ten d e d
b e n e fit
c la im a n ts a f t e r A p r i l 1 , 1 9 8 1 .
T h ose
on
season al
o r o t h e r t e m p o r a r y l a y o f f s w o u ld c o n t i n u e t o
g e t U I , s i n c e t h e i r r e g u l a r jo b i s e x p e c te d t o re su m e .
H ow ever,
in d iv id u a ls
w h ose p r o s p e c t s f o r r e t u r n i n g t o t h e i r p r e v i o u s l i n e
o f w o rk a r e s t i l l n o t g o o d a f t e r 3 m o n th s o f
u n e m p lo y m e n t
w o u ld
b e e x p e c t e d t o a d j u s t t o c h a n g e d e c o n o m ic c o n d i t i o n s b y a c c e p t i n g
a
jo b
th a t
may
not
pay
a s much a s t h e i r p r e v i o u s j o b .
T h is
c h a n g e w i l l s p e e d t h e t r a n s i t i o n fr o m j o b s t h a t a r e
not
o p e n in g
up a g a i n t o j o b s i n s e c t o r s w h e r e w o r k e r s a r e i n d e m a n d .




1-24

T h e r e s u l t i s e x p e c t e d t o b e a c h a n g e i n w o rk s e a r c h p r a c t i c e s b y
UI
c l a i m a n t s a n d a m o re r a p i d a s s i m i l a t i o n o f u n e m p lo y e d w o r k e r s
i n t o t h e e m p lo y e d l a b o r f o r c e .
B o th t h e w o r k e r s and t h e
e co n o m y
w ill
b e n e fit
fr o m
th e
d ecrease
in th e u n p r o d u c tiv e p e r io d o f
u n e m p lo y m e n t .
I n d i v i d u a ls w ith good
p ro sp e c ts
fo r
o b ta in in g
w o rk
in
c u sto m a ry
o c c u p a tio n
w ith in
a
r e a s o n a b ly
sh ort
p e r io d
r e m a in s u b j e c t t o r e g u l a r S t a t e r e q u i r e m e n t s .

th e ir
w o u ld

T h e p r o v i s i o n w o u ld b e a p p l i e d
to
r e g u la r
c la im a n t s
a fte r
13
w eeks
o f b e n e f i t s e f f e c t i v e O c to b e r 1 , 1 9 8 2 , t o g i v e S t a t e s tim e
to en act n ecessary le g is la t io n .
T h e F e d e r a l la w w o u ld b e am en ded
t o r e q u i r e t h e s u i t a b l e w o rk d e f i n i t i o n a s a c o n d i t i o n o f F e d e r a l
a p p r o v a l o f S t a t e UI
la w .
Su ch
app roval
is
r e q u ir e d
b e fo r e
e m p lo y e r s
m ay
c r e d it
t h e i r S t a t e UI t a x p a y m e n ts a g a i n s t t h e i r
F e d e r a l UI t a x l i a b i l i t y .
The p r o p o s a l
fu n d in g :

is

e x p e c te d

to

r e s u lt

in

th e

fo llo w in g

___________ ( i n m i l l i o n s
1981
1982
1983
C u rren t b a s e :
O u t l a y s ...................................
P o lic y r e d u c tio n :
O u t l a y s ...................................
P rop osed b u d g e t:
O u t l a y s ...................................




1 6 ,0 1 6

1 5 ,7 6 7

........

........

1 6 ,0 1 6

1 5 ,7 6 7

1-25

1 5 ,0 5 9
-2 8 5
1 4 ,7 7 4

changes

in

o f d o l l a r s ) _____________
1984
1985
1986

1 5 ,1 2 6
-2 8 5
1 4 ,8 4 1

1 4 ,7 9 8
-2 7 2
1 4 ,5 2 6

1 4 ,5 0 6
-2 6 4
1 4 ,2 4 2

Department of Labor

END OVERUSE AND EXCESSIVE BENEFITS UNDER
THE FEDERAL EMPLOYEES INJURY COMPENSATION PROGRAM

As p a r t o f th e g e n e r a l e f f o r t t o
im p r o v e
e n title m e n t
program s,
th e
A d m in is tr a tio n
w ill
overhaul
th e F e d e r a l e m p lo y e e s i n j u r y
c o m p e n s a tio n p r o g r a m .
T h ese
changes
are
geared
to
r e m o v in g
(1 ) in c e n tiv e s t o f i l e q u e s tio n a b le c la im s ; (2 ) d is in c e n t iv e s f o r
i n j u r e d w o r k e r s t o r e t u r n t o w ork when t h e y a r e m e d i c a l l y a b l e t o
d o s o ; a n d ( 3 ) i n e q u i t i e s i n c o m p e n s a t i o n r a t e s , w h ic h now p e r m i t
h i g h e r - p a i d w o r k e r s t o r e c e i v e m ore i n c o m p e n s a t i o n b e n e f i t s t h a n
th e y
r e c e iv e d
in
ta k e -h o m e
pay
w hen
w o r k in g .
T he n u m b e r o f
q u e s t i o n a b l e c l a i m s w i l l b e r e d u c e d and w o r k e r s w i l l b e
re sto re d
t o p r o d u c t i v e w o rk m o re q u i c k l y .
T h e c h a n g e s a r e b e i n g p r o p o s e d b e c a u s e t h e num ber o f c l a i m s b e i n g
s u b m itte d
fo r
w ork ers
c o m p e n s a tio n
b e n e f i t s under th e F e d e r a l
E m p lo y e e C o m p e n s a t i o n A c t (FECA) h a s b e e n g r o w i n g a t a n
a la r m in g
pace,
b e a r in g
no r e l a t i o n t o t h e num ber o f F e d e r a l e m p l o y e e s o r
t h e G o v e rn m e n t’ s
s a fe ty
record .
T he
annual
ra te
of
c la im s
r e c e i v e d b y t h i s p r o g r a m h a s g o n e fr o m 1 8 , 0 0 0 i n f i s c a l y e a r 1 9 7 0
to
over
3 0 ,0 0 0
in
1980.
T he i n c r e a s e d u s e o f t h i s p r o g r a m i s
a l s o r e f l e c t e d in th e
g ro w th
of
b e n e fit
p a y m e n ts,
fr o m
$151
m illio n
in 1 9 7 0 t o $78 5 m i ll i o n in 1 9 8 0 , to o v e r $ 1 .0 b i l l i o n in
1982.
I n a n e r a w h e re a l l s e c t o r s o f s o c i e t y a r e
b e in g
c a lle d
on
to
r e s tr a in
th e
g ro w th o f g o v e rn m e n t, i t i s i n e q u i t a b l e t o p r o v i d e
F e d e r a l e m p lo y e e s
w ith
an
in ju r y
c o m p e n s a tio n
sy ste m
w h ic h ,
th ro u g h
poor
d e s i g n , o v e r c o m p e n s a te s F e d e r a l e m p lo y e e s r e l a t i v e
t o th e c o m p e n s a tio n r e c e i v e d
by
p r iv a te
se cto r
e m p lo y e e s
fo r
s im ila r
in ju r ie s .
The
f o l l o w i n g p r o p o s e d r e f o r m s w o u ld e n s u r e
th e
e ffic ie n t
c o m p e n s a tio n
of
ju s tifia b le
c la im s ,
w h ile
e lim in a tin g
th e
o v e r c o m p e n s a tio n
and
o th e r
in e q u itie s
th a t
c u r r e n t l y p l a g u e t h e F e d e r a l e m p lo y e e s c o m p e n s a t i o n p r o g r a m :
in c r e a s e
m ake t h e
—

t h e c o m p e n s a tio n r a t e
e n t i r e am ou n t s u b j e c t

to
to

r e i n s t a t e th e 3 -d a y w a it in g p e r io d
r e c e i v e c o m p e n s a tio n b e n e f i t s ;

80% o f g r o s s
pay
but
F e d e r a l in c o m e t a x e s ;
b e fo r e

a c la im a n t

can

r e d u c e t h e p a y t h a t a p e r s o n c a n g e t f o r up t o
45
days
w h ile a c la im f o r c o m p e n s a tio n f o r a w o r k -r e la t e d i n j u r y
i s b e i n g p r o c e s s e d fr o m 100% t o 80% o f f u l l s a l a r y ; a n d
—

convert
s e r v ic e
curren t




FECA
c o m p e n s a tio n
r e c ip ie n ts
to
th e
c iv il
a n n u ity
r o lls
a fte r
age
65,
in s te a d o f th e
p r a c t i c e o f p r o v id in g , l i f e - l o n g c o m p e n s a tio n .

1-26

The l e g i s l a t i o n
fu n d in g :

is

e x p e c te d

to

1981
C u rren t b a s e :
Budget a u t h o r i t y .. . .
O u t l a y s ...................................
P o lic y r e d u c tio n :
B udget a u t h o r i t y .. . .
O u t l a y s ...................................
P rop osed b u d g e t:
Budget a u t h o r i t y .. . .
O u t l a y s ...................................




r e s u lt

in

th e

(in m illio n s
1982
1983

fo llo w in g

changes

o f d o lla r s )
1984
1985

in

1986

316
316

344
344

389
389

431
431

481
481

512
512

-----------

-1 0 2
-1 0 2

-1 1 4
-1 1 4

-1 2 6
-1 2 6

-1 3 8
-1 3 8

-1 5 1
-1 5 1

316
316

242
242

275
275

305
305

343
343

361
361

1-27

Department of Labor

ELIM INATION OF UNEMPLOYMENT COMPENSATION FOR THOSE WHO
VOLUNTARILY QUIT M ILITARY SERVICE

I n o r d e r t o t a r g e t u n e m p lo y m e n t c o m p e n s a t i o n o n t h o s e w o r k e r s who
are
tr u ly
in v o lu n ta r ily
u n e m p lo y e d ,
th e
A d m in is tr a tio n
w ill
prop ose
th a t
u n e m p lo y m e n t
c o m p e n s a tio n
fo r
e x -s e r v ic e m e m b e r s
(U CX) n o t b e p a i d
to
th o se
who
le a v e
th e
m ilit a r y
s e r v ic e s
v o l u n t a r i l y a f t e r J u ly 1 , 1 9 8 1 .
The
change
r e fle c ts
th e
fa c t
th a t
m ilita r y
s e r v ic e
i s now
e n t i r e ly v o lu n ta r y .
V i r t u a lly e v e ry S ta te c u r r e n tly p r o v id e s fo r
e i t h e r t e m p o r a r y d i s q u a l i f i c a t i o n fr o m b e n e f i t s o r a r e d u c t i o n i n
b e n e fit
a m o u n ts
to
c iv ilia n
e m p lo y e e s
who
q u it
th e ir
jo b s
v o lu n ta r ily ,
and
a l l S t a t e s r e f u s e b e n e f i t s t o t h o s e who r e f u s e
bona
fid e
e m p lo y m e n t
o ffe r s
in
th e ir
c u sto m a ry
o c c u p a tio n .
F ederal
la w
p r o h i b i t s S t a t e s fr o m t r e a t i n g e x - s e r v i c e m e m b e r s i n
t h e sam e m a n n e r .
T h e c h a n g e w o u ld
tre a t
a ll
e x -s e r v ic e m e m b e r s
th e
sa m e
n a tio n w id e ;
th o se
who q u i t t h e m i l i t a r y v o l u n t a r i l y ,
r e f u s i n g r e e n l i s t m e n t o f f e r s , w o u ld b e i n e l i g i b l e
fo r
b e n e fits .
U nder
th e
change,
th o se
w ith
o t h e r th a n h o n o r a b le o r g e n e r a l
d i s c h a r g e s w o u ld r e m a i n i n e l i g i b l e f o r b e n e f i t s .
The c h a n g e i s e x p e c t e d t o r e s u l t in a d e c r e a s e o f
about
70%
in
program
co sts.
E x -s e r v i c e m e m b e r s
w ith
at
le a s t
one y e a r o f
s e r v i c e who
w ere
in v o lu n ta r ily
se p a ra te d
fr o m
th e
m ilita r y ,
u n le s s
th e y
r e c e iv e d
o th e r
th a n
an
h o n o r a b le
or
gen eral
d i s c h a r g e , w o u ld c o n t i n u e t o
be
e lig ib le
fo r
b e n e fits .
O n ly
e x - s e r v i c e m e m b e r s who q u i t v o l u n t a r i l y w o u ld b e a f f e c t e d .
In
a d d itio n
to
th e
q u e s tio n
of
e q u ity ,
th e a v a i l a b i l i t y o f
l i b e r a l UCX b e n e f i t s u p o n v o l u n t a r y
s e p a r a tio n
fr o m
th e
a rm ed
s e r v ic e s
a g g ra v a tes
m ilita r y
p r o b le m s
in
r e ta in in g
tr a in e d
_
_
p e r s o n n e l.
A t a t i m e when s i g n i f i c a n t e f f o r t s a r e b e i n g m ade
in
th e
fa c e
of
severe
b u d g eta ry c o n s tr a in ts — t o f a c i l i t a t e
r e t e n t i o n b y u p g r a d in g m i l i t a r y
c o m p e n s a tio n ,
it
m akes
little
sen se
to
sp en d
a d d itio n a l
fu n d s t o e n c o u r a g e p r e s e n t m i l i t a r y
p e r s o n n e l t o l e a v e t h e arm ed s e r v i c e s .




1-28

The p r o p o s a l
fu n d in g :

is

e x p e c te d

to

r e s u lt

1981
C u rrent b a se :
B udget a u t h o r i t y .• ..
O u t l a y s ...................................
P o lic y r e d u c tio n :
Budget a u t h o r i t y .. . .
O u t l a y s ...................................
P roposed b u d g e t:
Budget a u t h o r i t y .. . .
O u t l a y s ...................................




in

th e

fo llo w in g

(in m illio n s
1983
1982

changes

o f d o lla r s )
1984
1985

in

1986

333
333

250
250

249
249

258
258

260
260

261
261

-6 0
-6 0

-1 7 5
-1 7 5

-1 7 5
-1 7 5

-1 8 1
-1 8 1

-1 8 3
-1 8 3

-1 8 3
-1 8 3

273
273

75
75

74
74

77
77

77
77

78
78

1-29

Department of Labor

ELIM INATING TRADE ADJUSTMENT ASSISTANCE PAYMENTS
TO PEOPLE ALREADY RECEIVING UNEMPLOYMENT INSURANCE BENEFITS

The A d m in is t r a t io n w i l l p r o p o s e l e g i s l a t i o n t o r e fo r m
th e
tra d e
a d ju s tm e n t
a s s is ta n c e
(T A A )
program
fo r
w ork ers by t a r g e t in g
b e n e f i t s on t h o s e w o r k e r s who h a v e n o t b e e n c a l l e d b a c k
to
w o rk
by
t h e i r f o r m e r e m p l o y e r s a n d who h a v e b e e n u n a b l e t o f i n d o t h e r
w o rk b y t h e t i m e t h e i r u n e m p lo y m e n t i n s u r a n c e ( U I )
b e n e fits
ru n
o u t.
F u rth e rm o re ,
paym ent
of
TAA
at
th e
sam e
tim e
as
u n e m p lo y m e n t i n s u r a n c e w i l l b e e l i m i n a t e d .
T h e o r i g i n a l p u r p o s e o f t r a d e a d j u s t m e n t a s s i s t a n c e w as t o a s s i s t
w ork ers
i n f i n d i n g new e m p lo y m e n t
when
c h a n g in g
in te r n a tio n a l
c o m p e titiv e
c o n d itio n s
c a u s e d t h e i n d u s t r i e s i n w h ic h t h e y w e r e
e m p lo y e d
to
d e c lin e .
T he
program
c o m b in e s
in c o m e
su p p o rt,
r e tr a in in g ,
and
r e lo c a tio n
a s s is ta n c e
to
p r o v id e
d is p la c e d
w o rk ers w ith th e
tim e
and
resou rces
th e y
need
to
adapt
to
c h a n g in g c o n d i t i o n s .
In
th e l a s t 4 y e a r s , h o w e v e r, th e e f f e c t o f th e program h a s b e e n
s e v e r e ly a lt e r e d .
W h o le s a le c e r t i f i c a t i o n o f w o rk ers in t r o u b le d
b a s i c i n d u s t r i e s h a s p r o d u c e d a s i t u a t i o n w h e r e TAA c a s h p a y m e n t s
a r e b e i n g made t o t h o u s a n d s o f w o r k e r s r e g a r d l e s s o f t h e i r i n t e n t
to seek
a lte r n a te
e m p lo y m e n t
in
new
and
g r o w in g
in d u s tr ia l
se cto rs.
In
a d d i t i o n t o d i s t o r t i n g th e program r e l a t i v e t o i t s
o r i g i n a l i n t e n t , t h i s s h i f t has produced a
cost
e x p lo s io n .
In
M a rch
o f 1 9 8 0 , f i s c a l y e a r 1 9 8 1 TAA c o s t s w e r e e s t i m a t e d a t $ 4 5 0
m illio n .
By
N ovem ber,
th is
e s tim a te
had
b a llo o n e d
to
$ 2 .7
b illio n ,
as
w ork ers
in
th e
a u to
and
ste e l
i n d u s t r i e s w ere
c e r t i f i e d as e l i g i b l e .
I m m e d ia te a c t i o n i s n e c e s s a r y t o
prevent
th e
p r o g r a m fr o m c o n t i n u i n g t o g e n e r a t e o u t l a y s f a r i n e x c e s s o f
t h o s e n e e d e d t o s a t i s f y t h e i n t e n t o f t h e la w T h e p u r p o s e o f t h e p r o p o s e d r e f o r m s i s t o r e f o c u s t h e TAA p r o g r a m
on
its
p r im a r y
p u rpose
—
a d ju s tm e n t
to
changed
e c o n o m ic
c o n d itio n s .
C ash
b e n e fits
w o u ld
be
p r o v id e d o n ly t o w o rk ers
d i s p l a c e d fr o m t h e i r j o b s f o r e x t e n d e d p e r i o d s who n e e d m o re t i m e
t o g e t t r a i n i n g , r e l o c a t e , o r f i n d new j o b s .
W ork ers
c e r tifie d
as
e lig ib le
f o r TAA w o u ld r e c e i v e a w e e k l y TAA p a y m e n t e q u a l t o
t h e i r w e e k l y u n e m p lo y m e n t i n s u r a n c e b e n e f i t a f t e r
th e y
u sed
up
a ll
th e ir
w eeks
o f u n e m p lo y m e n t i n s u r a n c e .
A d is p la c e d w ork er
c o u l d r e c e i v e up t o a t o t a l o f 52 w e e k s o f u n e m p lo y m e n t i n s u r a n c e
a n d TAA b e n e f i t s .
T h is change w i l l
in te g r a te
th e
TAA
program
w ith
th e
r e g u la r
UI s y s te m .
T he c h a n g e w o u ld b e e f f e c t i v e f o r
a l l p r e s e n t and f u t u r e c la i m a n t s
as
of
O cto b er 1 ,
1981.
A ll
w ork ers
c e r tifie d
fo r
TAA
w ill
c o n tin u e
to
be e li g i b le fo r
s p e c i a l TAA j o b s e a r c h a n d r e l o c a t i o n a l l o w a n c e s .
T he p r o p o s e d c h a n g e s a r e b a s e d on a s t u d y and r e c o m m e n d a tio n s
by
th e
G eneral
A c c o u n tin g
O ffic e
and
su p p o rted b y fin d in g s o f a
s e c o n d , in d e p e n d e n t s t u d y .
B o th s t u d i e s
fo u n d
th a t
m o re
th a n




1-30

tw o -th ir d s
o f t h e w o r k e r s who r e c e i v e d TAA h a d r e t u r n e d t o t h e i r
o r i g i n a l e m p lo y e r s a f t e r a t e m p o r a r y s p e l l o f
u n e m p lo y m e n t.
In
many c a s e s t h e s e TAA b e n e f i t s , w h ic h a r e m e a n t t o h e l p t h e w o r k e r
over
a p e r i o d o f u n e m p lo y m e n t, w e r e p a i d i n a lum p sum a f t e r t h e
w ork er had r e tu r n e d t o h i s o r h e r o ld jo b , o r
had
ta k en
a
new
one.
The
s tu d ie s
a ls o
fo u n d t h a t t h e w o r k e r s m o s t i n n e e d o f
a s s i s t a n c e w ere t h o s e
who
r e m a in e d
u n e m p lo y e d
fo r
a
le n g th y
p e r i o d and d id n o t r e t u r n t o t h e i r o r i g i n a l e m p lo y e r .
As
a
r e s u lt
of
th e
p rop osed
ch an ges,
lum p
sum p a y m e n ts o f
r e t r o a c t i v e b e n e f i t s t o t e m p o r a r i l y u n e m p lo y e d w o r k e r s
who
have
a l r e a d y r e t u r n e d t o w ork w i l l b e r e d u c e d s h a r p l y .
In th e c a s e o f
w ork ers
in
th e
a u to m o tiv e
in d u s tr y ,
th e
paym en t c o m p u ta tio n
m e c h a n is m h a s h a d t h e i n a d v e r t a n t e f f e c t o f s h i f t i n g
co sts
th a t
w o u ld
o th e r w is e
be
p a id
b y th e i n d u s t r y -f i n a n c e d s u p p le m e n ta l
u n e m p lo y m e n t
b e n e fits
(S U B )
fu n d s
to
th e
F ederal
T reasu ry.
C u r r e n t ly ,
in d u s tr y
SUB
fu n d s
p a y o n l y th e d i f f e r e n c e b e tw e e n
G o v e r n m e n t u n e m p lo y m e n t c o m p e n s a t i o n
and
th e
SUB
fu n d
in c o m e
g u a r a n t e e (u p t o 95% o f w a g e s ) .
T h u s , many w o r k e r s , p a r t i c u l a r l y
t h o s e i n t h e a u t o i n d u s t r y , do n o t r e c e i v e m ore in c o m e b e c a u s e o f
TAA,
b u t t h e SUB f u n d s p a y o u t l e s s .
I n f a c t , SUB f u n d s r e q u i r e
r e c i p i e n t s o f r e t r o a c t i v e TAA p a y m e n ts t o
pay
a ll
or
part
of
t h o s e p a y m e n ts b a c k t o t h e SUB f u n d .
U nder
th e
cu rren t
p r o g r a m , w o r k e r s who e x p e r i e n c e u n e m p lo y m e n t
cau sed a t
le a s t
in
p art
by
im p o r ts ,
as
d e te r m in e d
by
th e
S e c reta ry
of
L abor,
are
e lig ib le
fo r
h ig h e r
and
le n g th ie r
b e n e f i t s t h a n t h o s e a v a i l a b l e t o o t h e r u n e m p lo y e d w o r k e r s i n
th e
sam e c o m m u n i t i e s .
W orkers c e r t i f i e d by th e S e c r e t a r y a s e l i g i b l e
fo r
TAA
r e c e iv e
w e e k l y b e n e f i t s e q u a l t o 70% o f t h e i r p r e v i o u s
g r o s s w e e k l y w a g e s , up t o a maximum o f t h e n a t i o n a l a v e r a g e
w age
in
m a n u fa c tu r in g
(c u r r e n tly
§269
a
w e e k ) f o r up t o 52 w e e k s .
S in c e t h e s e b e n e f i t s a r e n o t t a x a b l e t o e m p lo y e e s
w ith
b e n e fits
b e lo w
th e
ta x a b ility
th r e s h o ld
on
u n e m p lo y m e n t
b e n e fits
in
c u r r e n t la w ,
th e
v a lu e
of
b e n e fits
r e c e iv e d
by
h ig h e r -w a g e
w ork ers
o f t e n e x c e e d s t h e a v e r a g e m a n u f a c t u r i n g w a g e l i m i t , w hen
com pared t o t a x a b le e a r n i n g s .
A f t e r th e change
as
of
O cto b er 1 ,
1981,
w e e k ly
TAA
b e n e fit
a m o u n ts
w ill
be
th e
sam e
a s t h e w o r k e r ‘ s w e e k l y u n e m p lo y m e n t
i n s u r a n c e b e n e f i t a m o u n t, a n d w i l l b e p a i d o n l y
to
w ork ers
who
h a v e u s e d up a l l t h e i r w e e k s o f u n e m p lo y m e n t i n s u r a n c e .




1- 31

T h is
p rop osal
fu n d in g :

is

e x p e c te d

to

1981
C u rrent b a se
Budget a u t h o r i t y .. . .
P o lic y r e d u c tio n :
B udget a u t h o r i t y ..
O u t l a y s .............................
P rop osed b u d g e t:
Budget a u t h o r i t y .. . .
O u t l a y s .............................




r e s u lt

in

th e

(in m illio n s
1983
1982

fo llo w in g

changes

o f d o lla r s)
1984
1985

in

1986

2 ,7 0 0

1 ,5 0 0
1 ,5 0 0

1 .0 0 0
1 ,0 0 0

500
500

500
500

500
500

------

- 1 ,1 5 0
-1 ,1 5 0

-7 6 0
-7 6 0

-3 3 0
-3 8 0

-3 8 0
-3 8 0

-3 8 0
-3 8 0

2 ,7 0 0

350
350

240
240

120
120

120
120

120
120

1-32

Department of Labor

PLACE THE BLACK LUNG TRUST FUND ON A SE L F -SU ST A IN IN G

B ASIS

T he b l a c k lu n g d i s a b i l i t y t r u s t fu n d (BLDTF) i s
r a p id ly
s in k in g
in to
in s o lv e n c y ,
p r o d u c in g
m a s s iv e d e f i c i t s t h a t a r e p r e s e n t l y
f i n a n c e d fr o m g e n e r a l r e v e n u e s .
A t t h e end o f f i s c a l y e a r
1980,
th e
t r u s t fu n d owed t h e U . S . T r e a s u r y $ 9 5 6 m i l l i o n .
O f th e $922
m i l l i o n e x p e c t e d t o b e e x p e n d e d fr o m t h e fu n d i n 1 9 8 1 , o n l y
$275
m illio n
w ill
b e c o v e r e d b y r e v e n u e s r e c e i v e d fr o m t h e c o a l t a x .
T h i s w i l l m ean t h a t a n o t h e r $ 6 4 7 m i l l i o n w i l l h a v e t o b e f i n a n c e d
by T re a su ry lo a n s .
U n d e r e x i s t i n g la w , t h e t r u s t fu n d w i l l
have
a p r o je c t e d d e f i c i t o f $ 9 .2 b i l l i o n b y 1 9 9 5 .
The
m a jo r
s o u r c e o f th e f u n d 's i n s o l v e n c y i s t h a t l a x s t a t u t o r y
a n d a d m i n i s t r a t i v e p r o c e d u r e s h a v e e x p a n d e d t h e p r o g r a m fr o m
its
o r ig in a l
pu rp ose
—
to
com p en sate
p e o p le
who
a re m e d ic a lly
d i s a b l e d b e c a u s e o f b l a c k lu n g d i s e a s e —
in to
a
gen eral
coal
m i n e r 's
b e n e fit
program
th a t
a p p r o a c h e s an a u t o m a t i c p e n s i o n .
R e c e n t GAO s a m p l i n g o f e l i g i b i l i t y c e r t i f i c a t i o n s fo u n d
th a t
an
a s to n is h in g
88%
o f a l l t h e c l a i m a n t s c e r t i f i e d a s e l i g i b l e w e re
e i t h e r n o t d i s a b l e d , o r e l s e c o u ld n o t b e p r o v e d
to
have
b la c k
lu n g d i s e a s e .
In
o r d e r t o p u t t h e t r u s t fu n d on a so u n d f i n a n c i a l f o o t i n g , t h e
A d m in is t r a t io n w i l l d e v e lo p a r e fo r m p r o p o s a l t h a t
w ill
re sto re
s o lv e n c y
by
r e s tr ic tin g
b e n e fit e n title m e n ts to th o se th a t are
t r u ly m e d ic a lly d is a b le d by
b la c k
lu n g ,
and
en su re
th a t
th e
program
is
fin a n c e d
b y a r e a s o n a b l e l e v y on t h e c o a l i n d u s t r y ,
ra th e r
th a n
fr o m
gen eral
reven u es.
T he
o b je c tiv e
of
th e
p r o p o s a ls
w o u ld
be
t o e l i m i n a t e q u e s t i o n a b l e c l a i m s and r e d u c e
t r u s t fu n d o u t l a y s t o a
le v e l
w h ere
th e
coal
in d u s tr y
c o u ld
fin a n c e
b e n e fits
w ith
a
r e a s o n a b le
c o a l t a x in c r e a s e w ith o u t
d r a w in g on t h e T r e a s u r y .
T h e BLDTF was c r e a t e d i n 1 9 7 8 t o p a y b l a c k lu n g b e n e f i t s and
th e
cost
of
a d m in is te r in g th e program .
T h e fu n d w as t o b e f i n a n c e d
t h r o u g h a c o a l p r o d u c t i o n t a x , w h ic h i s
c u r r e n tly
50 c e n ts
per
to n
fo r
u n dergrou n d
coal
a n d 25 c e n t s f o r s u r f a c e - m i n e d c o a l .
W h i l e t h e fu n d w as e x p e c t e d i n i t i a l l y t o
have
a
s m a ll
d e fic it
fin a n c e d
by
b o r r o w in g
fr o m
th e
U .S .
T reasu ry,
it
w as a l s o
e x p e c te d th a t by
th e
m i d - 1 9 8 0 's
it
w o u ld
becom e
and
r e m a in
s o lv e n t.
H ow ever,
p r e s e n t e x p e r i e n c e sh o w s t h a t u n l e s s c h a n g e s
a r e m a d e , t h e fu n d w i l l n o t b e s o l v e n t u n t i l t h e n e x t c e n t u r y .
T h ere i s s i g n i f i c a n t p o t e n t ia l fo r tig h te n in g
up
th e
p r o g r a m 's
e lig ib ility
r e q u ir e m e n ts
th a t
w o u ld
reduce
o u tla y s
w ith o u t
h a r m in g l e g i t i m a t e b e n e f i c i a r i e s .
S im p ly r e s t o r i n g
th e
program
to
its
o r ig in a l
p u rp ose
—
to
p r o v id e
b e n e fits
to
th o se
c e r t i f i a b l y d i s a b l e d b y b l a c k lu n g d i s e a s e
—
w o u ld
r e s u lt
in
m a jo r r e d u c t i o n s in p ro g ra m o u t l a y s .




1-33

o f d o lla r s )
1985
1984

1981

(in m illio n s
1983
1982

C u rren t b a s e :
O u t g o ........................................
In co m e ( - ) a / .................

824
-2 7 5

775
-2 9 2

647
-3 2 1

609
-3 4 1

669
-3 6 4

932
-3 7 9

D e f i c i t .................

549

483

326

268

305

553

-3 0

-3 7 8

-3 5 4

-3 5 3

-3 8 2

-4 6 9

519

105

P o lic y

change

( n e t ) ....

P rop osed b u d g et

( n e t ) ..

a/
T h ese
are
g o v e rn m e n ta l
r e c e ip t s s id e o f th e b u d g e t,
b / T r u s t fu n d s u r p l u s .

-2 8 b /

r e c e ip ts

and

-8 5 b /

1986

-7 7 b /

appear

on

83

th e

NOTE:
O u tg o p a t t e r n s v a r y fro m
year
to
year
becau se
of
e s tim a te s
of
t h e t i m i n g o f lu m p -su m p a y m e n ts an d r e i m b u r s e m e n t s
t o th e fu n d •




1- 3 4

Office of Personnel Management

ANNUAL INDEXATION OF C I V IL

SERVICE RETIREMENT ANNUITIES

U nder p r e s e n t p o l i c y , v i r t u a l l y e v e r y F e d e r a l
b e n e fic ia r y
group
r e c e i v i n g a s s i s t a n c e w i t h a u t o m a t i c a d j u s t m e n t s f o r t h e im p a c t o f
in fla tio n
h a s i t s p a y m e n ts a d j u s t e d a n n u a l l y .
P a y m e n ts f o r f o o d
s t a m p s , c h i l d n u t r i t i o n , and s o c i a l
s e c u r ity
are
now
a d ju s te d
a n n u a lly .
R e tir e d
c iv il
se rv a n ts,
h ow ever,
now
have
th e ir
p e n s io n s a d ju s t e d tw ic e a y e a r .
T h is
is
c le a r ly
u n fa ir .
To
assu re
e q u it a b le
tr e a tm e n t
fo r
a ll
r e c ip ie n ts o f a s s is ta n c e ,
b i - a n n u a l c o s t - o f - l i v i n g a d j u s t m e n t s w o u ld
be
r e p la c e d
w ith
a
s i n g l e a n n u a l a d ju s tm e n t f o r c i v i l s e r v i c e r e t i r e e s .
F ederal
c iv ilia n
r e tir e e s
have been w e ll p r o te c te d a g a in s t th e
im p a c t o f i n f l a t i o n an d
r e c e iv e
very
gen erous
a n n u itie s .
In
1979,
over
h a lf
of
th e
r e t i r e d e m p lo y e e s r e c e i v e d r e t i r e m e n t
p a y m e n ts o f o v e r $ 8 , 4 0 0 p e r y e a r .
I n f a c t , 25%
of
th e
r e tir e d
e m p lo y e e s r e c e i v e d o v e r $ 1 2 ,0 0 0 in 1 9 7 9 .
Ir o n ic a lly ,
th e se
gen erou s
a d ju s tm e n ts
have
m eant t h a t o l d e r
r e t i r e e s o f t e n r e c e i v e g r e a t e r b e n e f i t s th a n r e c e n t r e t i r e e s w ith
c o m p a r a b le p o s i t i o n s an d l e n g t h o f F e d e r a l s e r v i c e .
F o r e x a m p le ,
a G S -5 t y p i s t r e t i r i n g i n 1 9 6 5 a t a g e 6 2 w i t h 3 0 y e a r s o f F e d e r a l
s e r v ic e
w o u ld
c u r r e n tly
r e c e iv e
an
annual
a n n u ity
of
over
$ 1 1 ,0 0 0 ,
w h ile
a
s im ila r
e m p lo y e e
r e t i r i n g l a s t summer w o u ld
r e c e i v e l e s s th a n $ 8 ,0 0 0 a n n u a lly .
A
s im ila r
p rogram s.

p rop osal

has

been

1981
C u rren t b a s e :
B udget a u t h o r i t y . ...
P o lic y r e d u c tio n :
B udget a u t h o r i t y .. . .
P rop osed b u d g e t:
B udget a u t h o r i t y . ...




m ade

fo r

m ilit a r y

r e tir e m e n t

(in m illio n s o f d o lla r s )
1983 * 1984
1985
1982

1986

2 7 ,6 5 8
1 7 ,6 0 5

3 0 ,1 5 7
2 0 ,2 3 3

3 2 ,3 6 2
2 2 ,5 4 4

3 4 ,2 3 7
2 4 ,6 5 5

3 5 ,9 4 1
2 6 ,6 4 3

3 7 ,4 0 9
2 9 ,4 6 6

-----------

-5 5 8
-5 1 0

-4 7 2
-4 2 4

-4 3 0
-3 8 9

-4 1 6
-3 6 6

-4 1 7
-3 6 7

2 7 ,6 5 3
1 7 ,6 0 5

2 9 ,5 9 9
1 9 ,7 2 3

3 1 ,8 9 0
2 2 ,1 2 0

3 3 ,8 0 7
2 4 ,2 6 6

3 5 ,5 2 5
2 6 ,2 7 7

3 6 ,9 9 2
2 8 ,0 9 9

1-35




2.

REDUCE MIDDLE-UPPER INCOME BENEFITS

Department of Agriculture

CHILD N U TR ITIO N :
ELIM IN ATIO N OF SU B SID IE S FOR MIDDLE AND UPPER INCOME HOUSEHOLDS

As
part
of
th e
A
a s s is ta n c e
on
th e
s u b s id ie s t o s c h o o ls
T h ese
changes
w ill
t h e y a r e m ost n eeded
p r o p o r tio n s o f needy

d m in is tr a tio n ’ s
e ffo r ts
to
fo c u s
F ederal
tr u ly
needy,
th e s t r u c t u r e o f F e d e r a l m eal
and s i m i l a r i n s t i t u t i o n s
w ill
be
a lte r e d .
h e l p t o c o n c e n t r a t e F e d e r a l r e s o u r c e s w h e re
— in
sch ool
d is tr ic ts
w ith
th e
h ig h e st
fa m ilie s .

At
p rese n t,
th e
F e d e r a l G overn m en t p r o v i d e s s u b s i d i e s in t h r e e
d iffe r e n t
c a te g o r ie s
(c a s h ,
c o m m o d itie s ,
and
s p e c ia l
cash
a s s is ta n c e )
t o s c h o o l d i s t r i c t s t h a t a g r e e t o p r o v id e f r e e m e a ls
t o t h e l o w e s t - i n c o m e s t u d e n t s ( t h o s e b e l o w 125%
of
th e
p o v e rty
lin e ),
and
r e d u c e d -p r ic e d
m e a ls
t o th o s e w ith s l i g h t l y h ig h e r
in c o m e s (b e t w e e n 125% a n d 185% o f t h e p o v e r t y l i n e ) .
T he
b a s ic
cash
a n d c o m m o d ity s u b s i d i e s a r e d i s t r i b u t e d t o s c h o o l s b a s e d on
t h e t o t a l num ber o f c h i l d r e n p a r t i c i p a t i n g i n t h e
m eal
program ,
r e g a r d le s s
of
in c o m e
le v e l.
T he r e s u l t i s a s u b s i d y , e q u a l t o
a b o u t 50% o f t h e p u r c h a s e p r i c e o f m e a l s s e r v e d
to
m id d le an d
u p p e r - i n c o m e s t u d e n t s — m any o f whom com e fr o m f a m i l i e s w i t h v e r y
h ig h
in c o m e s .
G i v e n t h e n e e d t o f o c u s F e d e r a l b e n e f i t s on t h o s e
t r u l y in n eed , th e A d m in is tr a tio n
w ill
prop ose
le g is la tio n
to
r e s t r i c t s u b s i d i e s t o t h e lo w e r -in c o m e g r o u p s .
U nder
th e
A d m i n i s t r a t i o n p r o p o s a l , F e d e r a l s u b s i d i e s f o r m id d le
a n d u p p e r in c o m e f a m i l i e s
of
fo u r
w ith
annual
in c o m e s
above
$ 1 5 ,6 3 0
w ill
be
e lim in a t e d .
S tu d e n ts
fr o m
th e se
n o n -n e e d y
f a m i l i e s now r e c e i v e s u b s i d i e s
of
about
32
c e n ts
per
lu n c h .
S tu d e n ts
fr o m
f a m i l i e s o f f o u r w i t h in c o m e s b e t w e e n $ 1 1 , 6 4 0 and
$ 1 5 ,6 3 0 w i l l
c o n tin u e
to
have
th e ir
sch ool
m e a ls
p a r tia lly
s u b s id iz e d .
N e x t y e a r , s c h o o l d i s t r i c t s w o u ld r e c e i v e an a v e r a g e
F e d e r a l s u b s id y o f 64 c e n ts f o r each m eal s e r v e d t o t h i s grou p o f
stu d e n ts.
F o r s t u d e n t s fr o m f a m i l i e s o f f o u r w i t h in c o m e s b e l o w
$ 1 1 ,6 4 0 , th e p r e s e n t p o li c y o f f u l l s u b s id iz a t io n o f
m e a ls
w ill
c o n tin u e .
The
1 0 .3
m illio n
c h ild r e n
fr o m p o o r f a m i l i e s w i l l c o n t i n u e t o
r e c e i v e f u l l y s u b s i d i z e d f r e e s c h o o l l u n c h e s and 3 . 0 m i l l i o n w i l l
a l s o b e n e f i t fr o m a f u l l y s u b s i d i z e d
b r e a k fa st
at
s c h o o l.
An
a d d itio n a l
1 .9
m illio n
l e s s needy stu d e n ts w i l l r e c e iv e annual
s u b s i d i e s o f $ 11 5 p e r y e a r f o r lu n c h .
F ederal
su p p ort
w ill
no
l o n g e r c o n t i n u e f o r 1 4 . 5 m i l l i o n m i d d l e and u p p e r in c o m e s t u d e n t s
w h o se
sch ool
d is tr ic ts
now r e c e i v e m e a l s u b s i d i e s o f l e s s t h a n
$60 per stu d e n t each y e a r .
S ta te s or lo c a li t i e s
may
ch oose
to
s u b s id iz e
—
fr o m
th e ir
resou rces
—
stu d e n ts
w ith
la r g e r
i n c o m e s , o r p a r e n t s o f t h o s e s t u d e n t s may b u y s c h o o l m e a l s .




2-1

O t h e r n o n - e s s e n t i a l a c t i v i t i e s fu n d e d u n d e r t h i s a c c o u n t w i l l
be
te r m in a te d ,
in c lu d in g
f u n d s t o p u r c h a s e new s c h o o l f o o d s e r v i c e
e q u ip m e n t , n u t r i t i o n e d u c a t i o n and
tr a in in g
g ra n ts
to
S ta te s,
s u b s id iz e d
sn ack s,
an d
a ll
s u b sid ie s
t o . s c h o o ls
w ith
h ig h
tu itio n s .
T he b a s e a n d
s p e c ia l
s u b s id ie s
fo r
b o th
fr e e
an d
r e d u c e d p r i c e m e a l s w i l l b e a n n u a l l y i n d e x e d i n f u t u r e y e a r s fr o m
1982
le v e ls
fo r
p r ic e
changes
in
th e
c u r r e n tly
a u th o r iz e d
in d ic e s .
F i n a l l y , s c h o o l s s h o u l d v e r i f y on a s a m p le
b a s is ,
th e
in c o m e
e lig ib ility
of
stu d e n ts
c la im in g
f u l l o r p a r t i a l m eal
s u b s id ie s .
By f o c u s i n g F e d e r a l m e a l s u b s i d i e s on c h i l d r e n fro m
fa m ilie s
in
need.
F e d e r a l c o s t s w i l l b e r e d u c e d b y o v e r 35% n e x t y e a r , o r b y
m o re t h a n $9 b i l l i o n b y 1 9 8 6 .
A t t h e sam e t i m e ,
c o n tin u e d
fu ll
a n d p a r t i a l F e d e r a l s u b s i d i e s f o r lo w e r in c o m e s t u d e n t s w i l l h e l p
to
en su re
th a t t h e s e s tu d e n ts h ave a c c e s s t o a d e q u a te n u t r i t i o n
a t s c h o o l.
A d m in is tr a tiv e ly ,
th e se
changes
w ill
redu ce
th e
e x is tin g
c o m p l e x i t y o f o v e r 20 s u b s i d y r a t e s t h a t v a r y b y in c o m e
l e v e l , ty p e
of
m e a l,
and
ty p e
of
in s titu tio n
c la im in g
th e
s u b s id y .
T he
e lim in a t io n
of
a c t i v i t i e s c o l l a t e r a l t o fu n d in g
n u tr itio n
su b s id ie s
fo r
th e
needy
is
a
ste p
aw ay
fr o m
in a p p r o p r ia te
F ederal
in v o lv e m e n t
in
S ta te
and
lo c a l sch ool
a d m in is tr a tio n .
T h ese
p r o p o s a ls
e s tim a te s :

r e s u lt

in

th e

(in m illio n s
1932
1983

1981
C u rren t b a s e :
B udget a u t h o r i t y .. . .
O u t l a y s ................................ .
P o lic y r e d u c tio n :
B udget a u t h o r i t y ...
O u t l a y s ................................
P rop osed b u d g e t:
Budget a u t h o r i t y .. . .
O u t l a y s ................................ .




fo llo w in g

changes

in

o f do l l a r s )
1984
1985

budget

1986

3 ,4 6 4
3 ,3 6 0

4 ,1 5 5
3 ,9 1 8

4 ,5 8 2
4 ,3 2 1

4 ,9 2 6
4 ,6 4 6

5 ,2 5 8
4 ,9 5 9

5 ,5 7 9
5 ,2 6 1

-1 4 5
-4 2

-1 ,6 5 7
-1 ,5 7 5

-1 ,8 0 0
-1 ,7 0 9

-1 ,9 3 4
-1 ,8 3 5

-2 ,0 4 6
-1 ,9 4 0

-2 ,1 5 8
-2 ,0 4 5

3 ,3 1 9
3 ,3 1 9

2 ,4 9 9
2 ,3 4 3

2 ,7 8 2
2 ,6 1 2

2 ,9 9 3
2 ,8 1 1

3 ,2 1 2
3 ,0 1 8

3 ,4 2 1
3 ,2 1 6

2-2

Department of Education

REFOCUSING STUDENT ASSISTANCE

PROGRAMS

I n o r d e r t o r e s t o r e t h e f o c u s o f t h e tw o m a jo r s t u d e n t
fin a n c ia l
a s s is ta n c e
p r o g r a m s , a d m i n i s t e r e d b y t h e D e p a r tm e n t o f E d u c a t i o n
on t h e t r u l y n e e d y and t o e m p h a s i z e t h e t r a d i t i o n a l r o l e
of
th e
fa m ily
and
th e
s tu d e n t i n c o n t r i b u t i n g t o m e e tin g th e c o s t s o f
h ig h e r e d u c a tio n , th e
A d m in is tr a tio n
w ill
p rop ose
s ig n ific a n t
changes
in
b o th
t h e G u a r a n t e e d S t u d e n t L o an (G S L ) and t h e P e l l
G ran t p ro g ra m s.
In th e l a s t s e v e r a l y e a r s t h e s e program s
have
been
c o n tin u a lly
lib e r a liz e d ;
F ederal
b e n e fits
h a v e b ecom e e x c e s s i v e .
A lth o u g h
th e P e ll G ran t program , th e s u c c e s o r
to
th e
B a s ic
E d u c a tio n a l
O p p o r t u n i t y G r a n t (BEOG) p r o g r a m , i s d e s i g n e d p r i m a r i l y t o a s s i s t
lo w
in c o m e s t u d e n t s , g r a n t s a r e on o c c a s i o n p r o v i d e d t o s t u d e n t s
fr o m f a m i l i e s w i t h in c o m e i n e x c e s s o f $ 3 0 , 0 0 0 p e r y e a r .
The GSL
p r o g r a m now p r o v i d e s l o a n s o f up t o $ 2 , 5 0 0 a n n u a l l y f o r
stu d e n ts
and
up t o $ 3 , 0 0 0 a n n u a l l y t o t h e i r p a r e n t s r e g a r d l e s s o f in c o m e .
S u b s t a n t i a l F e d e r a l b e n e f i t s a re b e in g p a id o u t t o th o s e
who
do
n o t n e e d th em t o m e e t e d u c a t i o n a l e x p e n s e s .
By
m o re
d ir e c tly
t a r g e t i n g F e d e r a l s t u d e n t l o a n s a n d g r a n t s on
n eed y s t u d e n t s , program
co sts
w ill
be
reduced
by
over
$ 9 .2
b illio n
in
1 9 8 1 -1 9 8 6 .
A t t h e sam e t i m e , t h e i m p o r t a n t n a t i o n a l
p o l i c y o b je c t i v e o f a s s u r in g e q u a l
access
to
h ig h e r
e d u c a tio n
w i l l b e m a in ta in e d .
U nder
th e se
p r o p o s a l s , G u a r a n te e d S t u d e n t Loan p ro g ra m i n t e r e s t
b e n e f i t s w i l l n o t b e p a i d t o b o r r o w e r s who c a n n o t
d e m o n str a te
a
need fo r th e s e s u b s id ie s t o fin a n c e t h e i r e d u c a tio n .
T h is change
w ill
be
a c h i e v e d b y l i m i t i n g s t u d e n t l o a n a m o u n ts t o " r e m a i n i n g
n e e d " ( e d u c a t i o n a l c o s t s m in u s
o th e r
a id
and
e x p e c te d
fa m ily
c o n tr ib u tio n ),
e lim in a t in g
th e
in -s c h o o l
in te r e s t
s u b s i d y on
l o a n s t o s t u d e n t s , and e l i m i n a t i n g t h e F e d e r a l s p e c i a l
a llo w a n c e
to
le n d e r s
on l o a n s t o p a r e n t s .
B e n e f i t s t o t h e h i g h e s t in c o m e
s tu d e n ts w i l l a l s o b e e lim in a te d in th e
P e ll
G ran t
program
by
in c r e a s in g
t h e am ou n t o f d i s c r e t i o n a r y in c o m e t h a t f a m i l i e s m u s t
c o n t r i b u t e t o t h e s u p p o r t o f a s t u d e n t a n d b y r e q u i r i n g an a n n u a l
$ 7 5 0 s e l f - h e l p c o n t r i b u t i o n fr o m s t u d e n t s , e x c e p t
w h e re
ex tre m e
f i n a n c i a l need i s d e m o n s tr a te d .
W i t h o u t t h e s e m a jo r r e f o r m s , t h e G u a r a n t e e d S t u d e n t L o a n p r o g r a m ,
in
p a r tic u la r ,
c o u ld
be
r e c k l e s s l y e x p a n d e d o v e r t h e n e x t fe w
years.
U nder t h e
GSL
program ,
stu d e n ts
can
borrow
a n n u a lly
r e g a r d le s s
o f t h e i r in c o m e o r e d u c a t i o n a l n e e d , w i t h t h e F e d e r a l
g o v e r n m e n t p a y i n g a l l t h e i n t e r e s t on t h e l o a n u n t i l t h e
stu d e n t
is
out
of
s c h o o l.
T he
r e s u l t i s t h a t th e F e d e r a l govern m en t
b o r r o w s m on ey a t h i g h r a t e s o f i n t e r e s t , t u r n i n g i t o v e r —
f ree
—
to
stu d e n ts
to
sp en d a s th e y se e f i t .
W h ile th e p r i n c i p a l
am ount o f t h e lo a n m u st e v e n t u a l l y be
r e p a id ,
th e
proceeds
of
th e se
lo a n s
can
be
in v e s te d
in
m oney
m a rk e t fu n d s o r o t h e r




2-3

i n v e s t m e n t s , a l l o w i n g s t u d e n t s and t h e i r f a m i l i e s t o e a r n
1 4 -1 5 %
y ie ld s
on
m oney
fo r
w h ic h
th e
F ederal
govern m en t i s p a y in g
1 4 -1 5 % , b e f o r e e v e n t u a l l y r e p a y in g th e
lo a n .
W ith o u t
r a tio n a l
lim ita tio n s ,
su ch
as
th e
A d m in is tr a tio n
is
p r o p o s in g ,
th e
D e p a r tm e n t o f E d u c a t i o n c o u l d s o o n b e co m e t h e c r e d i t o r
of
fir s t
resort
fo r
every
A m e r ic a n
fa m ily
th a t
has
a
f a m i l y m em ber
e n r o lle d in u n d e rg ra d u a te o r
g ra d u a te
e d u c a tio n .
T he
s a v in g s
b e lo w r e f l e c t t h e e f f e c t s o f t h e s e l i m i t a t i o n s .

(in m illio n s
1983
1982

1981
C u rren t b a s e :
Budget a u t h o r i t y . . . .
O u t l a y s ..................................
P o lic y r e d u c tio n :
Budget a u t h o r i t y .. . .
O u t l a y s ..................................
P rop osed b u d g e t:
Budget a u t h o r i t y .. . .




o f d o lla r s )
1984
1985

1986

4 ,8 1 2
4 ,1 0 4

5 ,3 4 1
5 ,1 7 8

5 ,5 7 4
5 ,5 1 6

5 ,7 3 9
5 ,6 9 8

5 ,7 6 9
5 ,7 6 1

6 ,0 0 4
5 ,9 4 5

-3 3 8
-1 0 6

-1 ,0 1 6
-8 0 3
*

-1 ,6 5 9
-1 ,4 9 9

-1 ,8 5 7
- 1 ,8 0 8

-2 ,0 7 4
-2 ,0 1 9

-2 ,2 8 7
-2 ,2 3 3

4 ,4 7 4
3 ,9 9 8

4 ,3 2 5
4 ,3 7 5

3 ,9 1 5
4 ,0 1 7

3 ,9 8 2
3 ,8 9 0

3 ,6 9 6
3 ,7 4 2

3 ,7 1 7
3 ,7 1 2

2- 4

ELIMINATING THE STUDENT LOAN MARKETING A SS O C IA T IO N ’ S
( SALLIE MAE) ACCESS TO FEDERAL BORROWING

T he A d m i n i s t r a t i o n p r o p o s e s t o e l i m i n a t e S a l l i e M a e 's
access
to
th e
F ederal
F in a n c in g
Bank
(F F B ).
S a l l i e Mae was s e t up a s a
p r iv a te
c o r p o r a tio n
to
p r o v id e
a
secon d ary
m ark et
fo r
th e
G u a ra n tee d
S tu d en t
L oan
(G SL )
p rogram .
S a l l i e Mae b u y s t h e s e
l o a n s u s i n g F F B -p r o v i d e d c a p i t a l u n d e r a D e p a r tm e n t o f
E d u c a tio n
g u a ra n te e .
S a l l i e Mae e f f e c t i v e l y i n c r e a s e s t h e t o t a l v o lu m e o f
l o a n s u n d e r t h e GSL p r o g r a m o v e r and a b o v e
w hat
w o u ld
be
le n t
w ith o u t a se c o n d a ry m a rk e t.
W ith
GSL
v o lu m e
a t r e c o r d l e v e l s , s t i m u l a t i o n b y S a l l i e Mae i s
u n n ecessary.
I n f a c t , o u t s t a n d i n g GSL c o m m itm e n ts a r e
s c h e d u le d
to
d o u b le in 1 9 8 2 o v e r th e l e v e l p r e v a i l i n g a s r e c e n t l y as 1 9 8 0 ,
r i s i n g t o o v e r $ 2 0 b i l l i o n i n o u t s t a n d i n g c o m m itm e n ts b y t h e
end
of
th e
year.
Some
o f th e 49 S t a t e g u a r a n te e a g e n c ie s p r o v id e
s e c o n d a r y m a rk e ts f o r s t u d e n t lo a n s .
F u rth e r,
th e re
are
o th e r
i n c e n t i v e s w i t h i n t h e GSL p r o g r a m t o g e n e r a t e t h e l o a n c a p i t a l i t
n eed s.
In
a d d i t i o n , th e A d m in is t r a tio n w i l l p r o p o s e ch an ges t o
e n s u r e t h a t G u a ra n tee d S tu d e n t
Loans
are
a v a ila b le
fo r
needy
stu d e n ts.
G iv e n
th is
e x p a n d in g
resou rce
b a s e in s u p p o r t o f s t u d e n t lo a n
o r i g i n a t i o n s in th e p r i v a t e s e c t o r , i t i s s im p ly
un n ecessary
to
p r o v id e
S a llie
Mae
w ith
a d d itio n a l
c a p ita l
to
expand
its
secon d ary
m arket
o p e r a tio n s
in
g u a ra n te e d
stu d e n t
lo a n s .
A lth o u g h
th is
p rop osal
h a s no o n - b u d g e t o u t l a y i m p a c t , i t w i l l
r e d u c e F e d e r a l b o r r o w in g
r e q u ir e m e n ts
in
th e
N a tio n ’ s
c r e d it
m a rk e ts
b y r e d u c in g t h e b o r r o w in g r e q u ir e m e n ts o f th e o f f - b u d g e t
F e d e r a l F in a n c in g B ank.
By e l i m i n a t i n g t h e D e p a r tm e n t o f E d u c a t i o n 's g u a r a n t e e o f
S a llie
M ae’ s
FFB
b o r r o w in g ,
o ff-b u d g e t
sa v in g s
w ill
o c c u r due t o a
r e d u c t i o n o f an e s t i m a t e d $ 1 5 b i l l i o n o f F e d e r a l
F in a n c in g
Bank
a c q u is it io n s o ver th e n ex t f i v e y e a r s .

FFB AC Q U ISIT IO N OF SALLIE MAE OBLIGATIONS
(in m illio n s
1982
1983

1981
C u r r e n t b a s e .............................
P o l i c y r e d u c t i o n ..................
P r o p o s e d b u d g e t .....................




o f d o lla r s )
1984
1985

1986

1 ,0 9 5
1 ,9 2 3
2 ,5 0 0
3 ,0 0 0
3 ,5 0 0
4 ,0 0 0
........- 1 , 9 2 3 - 2 , 5 0 0 - 3 , 0 0 0 - 3 , 5 0 0 - 4 , 0 0 0
1 ,0 9 5
--------------------------

2-5




3.

RECOVER CLEARLY ALLOCABLE COSTS FROM USERS
(INCREASE IN GOVERNMENTAL RECEIPTS)

D e p a r tm e n t o f

ELIMINATE

D e fe n s e

-

C iv il

INLAND WATERWAY SU B SID IE S

T he A d m i n i s t r a t i o n w i l l s e e k t o e l i m i n a t e t h e s u b s i d y
on
in la n d
w a te rw a y s,
b e g in n in g
i n 1 9 8 3 , b y i n c r e a s i n g u s e r s f e e s on b a r g e
fu e l.
T he F e d e r a l G o v e rn m e n t now s p e n d s o v e r
$325
m illio n
per
y e a r i n t h e o p e r a t i o n a n d m a in t e n a n c e o f c e r t a i n i n l a n d w a te r w a y s
fo r
c o m m e r c ia l
t r a f f i c w h ic h u n t i l t h i s y e a r h a s p a i d no t a x o r
fe e fo r sy ste m u s e .
T h i s y e a r a new c h a r g e o f 4 c e n t s p e r g a l l o n
on b a r g e f u e l w i l l c o v e r o n ly
11%
of
th a t
co st.
U nder
th is
p r o p o s a l,
u ser
fe e s
w ill
in c re a se
fr o m 6 c e n t s p e r g a l l o n t o
a b o u t 30 c e n t s p e r g a l l o n i n 1 9 8 3 t o c o l l e c t th e $ 3 2 5 m i l l i o n th e
G overn m en t w i l l sp e n d on t h e o p e r a t i o n
and
m a in t e n a n c e
of
th e
w a te rw a y s.
I t i s e s tim a te d t h a t th e in c r e a s e in c o s t t o s h ip p e r s
w ill
be
le s s
th a n 0 . 4 c e n t s p e r to n m i l e .
The p roq ram w i l l be
d e s i g n e d t o i n c r e a s e r e c e i p t s t h e r e a f t e r a s e x p e n s e s r i s e and
to
pay
f o r new c o n s t r u c t i o n and o p e r a t i o n a n d m a i n t e n a n c e o f f u t u r e
new w a te r w a y s a s t h e y a r e c o m p l e t e d .
R e c e ip t s w i l l be p la c e d in th e in la n d
w a te r w a y
tru st
fu n d
and
w ill
be
u s e d t o p l a c e t h e w a te r w a y s on a s e l f - s u s t a i n i n g b a s i s .
U se rs w i l l n o t be r e q u ir e d to re p a y th e c o n s t r u c t io n c o s t o f
th e
e x is tin g
sy ste m
(e s tim a te d
at
$6 b i l l i o n ) — o n l y t h e c o s t o f
a d d i t i o n s a s th e y a re c o m p le te d .
To t h e e x t e n t t h a t t r a f f i c
may
be
d i v e r t e d t o o t h e r l e s s c o s t l y fo rm s o f t r a n s p o r t a t i o n b e c a u s e
o f ch an ges in s h ip p in g c o s t s
r e s u ltin g
fr o m
th e
prop osed
ta x
in c r e a s e ,
our
to ta l
t r a n s p o r t a t io n sy ste m w i l l be e c o n o m ic a lly
m ore e f f i c i e n t .
L e g is la tio n

w ill

be

T he l e g i s l a t i o n w i l l
fo llo w in g t a b le :




su b m itte d
in c r e a s e

to
th e

3-1

r a is e

th e

u ser

fe e s.

fe e s

per

g a llo n

as

show n

in

th e

(in m i l l i o n s o f d o l l a r s )
_ ___
1982
1983
1984
1985
1986

19 81
P o te n tia l r e c e ip ts 1 / :
C u rren t r e c e i p t s . . . .
P rop osed i n c r e a s e . . .
P r o p o s e d b u d g e t ............
E s tim a te d r a t e s
(c e n ts per g a llo n ) :
E x is tin g le g i s la t i o n
P r o p o s e d l e v e l ...............

1/
o u tla y s .

T h ese




ite m s

are

30

58

67
258
325

4
4

6
6

6
30

58

30

—

g o v e rn m e n ta l

3-2

r e c e ip ts ,

80
275
355

90
300
390

115
315
430

8
31

8
32

10
34

not o ffs e t s

to

Department of Transportation

ELIMINATING SU B SID IE S FOR AIRPORT AND AIRWAY USERS

To s h i f t th e c o s t s o f govern m en t s e r v i c e s t o t h o s e
who
d ir e c tly
b e n e fit,
t h e A d m i n i s t r a t i o n w i l l p r o p o s e an i n c r e a s e i n a v i a t i o n
u ser ta x e s
b e g in n in g
in
1982.
The
ta x e s
w ill
a ffe c t
b o th
c o m m e r c ia l and g e n e r a l a v i a t i o n .
T he
F ederal
A v i a t i o n A d m i n i s t r a t i o n (F A A ) p r o v i d e s t h e s e r v i c e s
n ecessa ry fo r
a
sa fe
and
e ffic ie n t
a v ia tio n
sy ste m .
T h ese
s e r v ic e s
in c lu d e
th e
o p e r a tio n
of
a i r p o r t to w e r s and e n r o u t e
c e n t e r s t h a t make up t h e n a t i o n a l
a ir
tr a ffic
c o n tro l
sy ste m .
T he
FAA a l s o p r o v i d e s a v a r i e t y o f l i c e n s i n g , c e r t i f i c a t i o n , an d
i n s p e c t i o n s e r v i c e s f o r t h e a v i a t i o n c o m m u n ity .
P r o v id in g th e s e s e r v i c e s i s
a
m u lti-b illio n
d o lla r
o p e r a tio n .
T he
u sers
— c o m m e r c ia l a n d g e n e r a l a v i a t i o n — r e c e i v e m o s t o f
t h e b e n e f i t s and s h o u l d p a y f o r t h e
co sts.
N ot
r e q u ir in g
th e
u s e r s to b e a r th e f u l l c o s t o f t h e i r a c t i v i t i e s e n co u ra g es h ig h e r
u se
o f t h e s y s t e m t h a n w o u ld o t h e r w i s e b e t h e c a s e , r e s u l t i n g i n
c o n tin u a l
p ressu re
to
expand
th e
s y s t e m 's
c a p a c ity .
T he
A d m i n i s t r a t i o n 's
p rop osal
fo r
a 20% a v i a t i o n f u e i t a x — w h ic h
w i l l m ore t h a n d o u b l e t h e 1 9 8 0 f u e l
ta x
—
w ill
s ig n ific a n tly
in c r e a se
th e
recovery
of
co sts
put
on t h e s y s te m b y g e n e r a l
a v ia tio n .
H ow ever,
gen eral
a v ia tio n
w ill
c o n tin u e
to
be
c r o s s - s u b s i d i z e d b y c o m m e r c i a l a v i a t i o n , w h ic h w i l l p a y m ore t h a n
100% o f t h e s y s t e m c o s t s .
A lth o u g h a v i a t i o n u s e r s h a v e p a id t a x e s i n t h e p a s t , th e C o n g r e s s
has
r e s tr ic te d
th e
u se o f th e r e s u lt in g rev en u es to c o v e r ju s t
s l i g h t l y o v e r 40% o f t h e s y s t e m c o s t s .
T he g e n e r a l t a x p a y e r
has
c a r r ie d th e r e s t o f th e b u rd en .
T he A d m i n i s t r a t i o n ' s p r o p o s a l i s
d e s ig n e d t o overcom e t h i s i n e q u i t y .
T he
co sts
of
th e
a ir w a y t r u s t fu n d .
in
an
u n c o m m itte d
b i l l i o n in 1 9 8 0 .

a v i a t i o n s y s t e m a r e p a i d fr o m t h e a i r p o r t and
T he p a s t c o n g r e s s i o n a l r e s t r i c t i o n s
r e s u lte d
tru st
fu n d
b a la n c e
of
a p p r o x im a te ly $ 3 .7

T he A d m i n i s t r a t i o n ' s t a x p r o p o s a l w i l l e n s u r e t h a t f u n d s r e q u i r e d
t o c a r r y o u t FAA p r o g r a m s w i l l e q u a l t h e r e v e n u e
r a is e d
th ro u g h
u ser
ta x e s.
A 20% f u e l t a x , 9% p a s s e n g e r t i c k e t t a x , 5% f r e i g h t
w a y b i l l t a x , and o t h e r m i s c e l l a n e o u s t a x e s a r e
in c lu d e d
in
th e
p r o p o s a l.
T h ese
ta x e s
w ill
g e n e ra te
revenue
to ta lin g
a p p r o x im a te ly $ 3 .3 b i l l i o n in 1 9 8 2 , i n c r e a s in g t o $ 5 .2 b i l l i o n in
1986.
By t h e m i d - 1 9 8 0 ' s , r e v e n u e s w i l l e x c e e d FAA f u n d i n g l e v e l s
s o t h a t t a x r e d u c t i o n s may b e p o s s i b l e .




3- 3

(in m i l l i o n s o f d o l l a r s )
1982
1983
1984
19 85

19 81
C u r r e n t r e c e i p t s .................
P o l i c y i n c r e a s e ....................
P r o p o s e d r e c e i p t s ...............




1 ,8 0 2
.......
1 ,8 0 2

1 ,3 7 7
1 ,R 8 2
3 ,2 5 9

3-4

1 ,5 3 4
2 ,1 5 9
3 ,6 9 3

1 ,7 0 3
2 ,4 4 2
4 ,1 4 5

1 ,8 7 1
2 ,7 5 3
4 ,6 2 4

1 98 6
2 ,0 9 1
3 ,1 0 4
5 ,1 9 5

Department of Transportation

E S T A B L I S H B O A T AND Y A C H T OW NER F E E S

T h e c o s t o f r u n n i n g t h e U . S . C o a s t G u a r d (U S C G ) w i l l e x c e e d
$ 1 .3
b illio n
in
1982.
A lm o st
a ll
USCG s e r v i c e s a r e p r o v i d e d t o a
sm a ll seg m en t o f th e p u b lic
w ith o u t
ch arg e.
S e rv ic e s
in c lu d e
lic e n s in g , in s p e c tio n , v e s s e l d o c u m e n ta tio n , o p e ra tio n o f a id s to
n a v ig a tio n ,
re s c u e an d to w in g a s s i s t a n c e , ic e b r e a k in g , and w a te r
p o llu tio n
m o n ito rin g
and
c le a n u p ,
am ong
o th e rs.
The
a p p ro x im a te ly
n in e
m illio n
in d iv id u a ls
and firm s w ho d i r e c t l y
b e n e f i t fro m th e s e s e r v ic e s
sh o u ld
pay
fo r
th e m .
T h erefo re,
le g isla tio n
w ill
be
su b m itte d
to
th e C o n g ress to a u th o riz e a
g r a d u a t e d s y s t e m o f f e e s f o r USCG s e r v i c e s .
The
fees
w o u ld
be
phased
in o v e r t h e n e x t 4 y e a r s a n d w o u ld e v e n t u a l l y c o v e r a b o u t
h a l f t h e c o s t s o f USCG e x c e p t t h o s e r e l a t e d
to
la w
en fo rcem en t
and m ilita ry re a d in e s s .
W h ile th e N e b ra s k a fa rm e r c a n r e a s o n a b ly
be
e x p e c te d
to
h e lp
pay
fo r
th e
cost
of
d efen se
a n d la w
e n fo rc e m e n t, i t is u n re a s o n a b le th a t h e o r sh e
sh o u ld
su b sid iz e
th e c o s t o f s e r v ic e s t h a t a s m a ll num ber o f y a c h tsm e n , fis h e rm e n ,
an d s h ip o w n e rs now e n jo y f r e e o f c h a rg e .
B e g in n in g
in
1982,
a
ch arg e
w o u ld
be
le v ie d fo r a ll d ire c t
a d m in is tra tiv e se rv ic e s (e .g .,
is su a n c e
of
a m e rc h a n t m a rin e
lic e n se ,
d o c u m e n ta tio n
of
a boat
or
v e s se l, p e rio d ic sa fe ty
in s p e c tio n s , s u p e rv isin g th e
d o c k in g
or
lo a d in g
o f h azard o u s
carg o ,
e tc .).
T hese
fees
m ig h t
ran g e
fro m S15 to S20 f o r a
ro u tin e lic e n s e re n e w a l, to
sev eral
th o u s a n d s
of
d o lla rs
fo r
in sp e c tio n
of
a h azard o u s
carg o
fa c ility
o r th e te s tin g and
c e r t i f i c a t i o n o f a b o a t 's s t r u c t u r a l i n t e g r i t y .
A sy ste m o f a n n u a l fe e s w il l b e i n i t i a t e d to c o v e r
th e
cost
of
in d ire c t
se rv ic e s
u se d b y r e c r e a t io n a l b o a te r s , c o m m e rc ia l b o a t
o p e r a to r s , and th e m e rc h a n t m a rin e ( e .g ., m a in ta in in g
buoys
and
n a v ig a tio n
lig h ts ,
h arb o r
vessel
tra ffic
sy ste m s,
rescu e
h e lic o p te rs,
and
b o a ts
and
crew s
on
sta n d b y ).
T hese w ill
in itia lly
ra n g e fro m $10 to $20 a n n u a lly fo r a r e c r e a t io n a l b o a t
u se d on in la n d w a te rw a y s to s e v e r a l h u n d re d o r a th o u s a n d d o l la r s
fo r c o m m e rc ia l v e s s e ls t h a t o p e r a te m a in ly in c o a s ta l w a te r s .
As i s th e c a s e w ith m any
a lre a d y
c o lle c te d (e .g .,
on F ed eral
la n d s),
boat
in d u s try w ill be ch arg ed
cost
o f b e n e fits th e y re
on th e g e n e ra l
ta x p a y e r
b illio n ).

F ed eral a c tiv itie s fo r
w h ic h
fees
are
u se o f p a rk cam p g ro u n d s, c a t t l e g ra z in g
and
yacht
o w n ers
and
th e
m a ritim e
r e l a t i v e l y sm a ll fe e s in r e la tio n to th e
c e iv e .
In th e a g g re g a te , th e ta x b u rd en
w ill
be
red u ced
su b sta n tia lly
($ 1 -5

The
D e p a rtm e n t o f
T ra n s p o rta tio n is d e v e lo p in g th e le g is la tiv e
p ro p o sa ls and fe e sc h e d u le s n e c e ssa ry to
im p le m e n t
th is
p o lic y
an d l e g i s l a t i o n w i l l b e s u b m itte d to th e C o n g re s s in e a r l y M arch .




3-5

1981

C u r r e n t r e c e i p t s ......................
I n c r e a s e d r e c e i p t s ...............
P ro p o sed b u d g et r e c e ip ts




..........
..........
-------

3- 6

(in m i l l i o n s o f d o l l a r s )
1982
1983
1984
1985

100
100

200
200

300
300

400
400

4.

A P PL Y SOUND CRITERIA TO ECONOMIC SUBSIDY PROGRAMS

D e p a rtm e n t o f A g r ic u ltu r e

R E D U C T IO N IN F E D E R A L S U B S I D I E S FO R T H E D A IR Y IN D U S T R Y

T he F e d e r a l G o v ern m en t b u y s d a ir y p ro d u c ts e q u iv a le n t to a b o u t
8
b illio n
pounds
o f m ilk a y e a r , w h ic h c o s ts ta x p a y e r s a b o u t $ 1 .3
b ill io n and d riv e s up consum er p r ic e s .
The
P re sid e n t
p ro p o ses
r e f o r m s i n t h i s p ro g ra m t o a c h ie v e tw o b a s i c o b j e c t i v e s :
—

a v o id e x c e ss p ro d u c tio n an d
G o v e rn m e n t-h e ld
su rp lu s e s,
re su ltin g
in re d u c e d c o s ts to G o v ern m en t an d co n su m ers?
and

—

p ro v id e s u f f ic ie n t p ric e su p p o rt fo r th e d a iry
to e n su re a d e q u a te s u p p lie s o f d a iry p ro d u c ts.

E x p e c te d

re su lts

of th is

refo rm
or

are:

—

th e e lim in a tio n
p ric e s;

—

red u ced p ro d u c tio n

—

lo w e r p r ic e s f o r c o n su m e rs an d
d a iry p ro d u c ts;

re d u c tio n

of

in c re a se s

in

d a iry

o f e x c e ss m ilk ;

red u ced
b u tte r,
—

in d u stry

F e d e ra l G o v ern m en t
and ch e ese ; and

redu ced

in c re a se d

p urch ases

of

c o n su m p tio n
excess

of

m ilk ,

F ed eral b ud get o u tla y s.

U s u a lly , a d e c re a s e in p ro d u c tio n r e s u lt s in h ig h e r p r ic e s .
The
d a iry
p ric e
su p p o rt
sy ste m , h o w e v e r, h a s a l te r e d th e fo rc e s o f
su p p ly and dem and fo r s e v e ra l y e a rs .
U nder th e p ro g ram as i t
is
c u r r e n t l y s t r u c t u r e d , m o re m ilk i s p ro d u c e d w hen G o v e rn m e n t d a ir y
p ric e
su p p o rts
are
in c re a se d .
B ecause
th e re have been la rg e
s u rp lu s e s o f m ilk s in c e 1 97 8, th e in c r e a s e d
p ro d u c tio n
m ust be
p u r c h a s e d b y th e F e d e r a l G o v e rn m e n t.
As a r e s u lt, F e d e ra l sto c k s
are
in c re a se d
and
p ric e s
p a id b y co n su m ers a re in c re a s e d .
By
d e c re a sin g
th e
F ed eral
su b sid y
fo r
d a iry
p ro d u c ts,
excess
p ro d u c tio n w ill b e slo w ly e lim in a te d .
T h is s h o u ld r e s u l t in m o re
s ta b le
p ric e s
th a t d ep en d on su p p ly and dem and fo r b o th fa rm e rs
an d co n su m ers, r a th e r th a n th e a r t i f i c a l l y h ig h p r ic e s c r e a te d by
a F e d e ra l s u b sid y p ro g ram .
To a c h ie v e
th e se
o b je c tiv e s,
th e
A d m in istra tio n
w ill
s u b m it
le g isla tio n
to
e lim in a te
th e m a n d a to ry in c r e a s e in d a ir y p r ic e
s u p p o r t c u r r e n t l y r e q u i r e d b y la w o n
A p ril 1,
1981.
L o n g -te rm




4-1

refo rm s
w ill
b e p a r t o f th e A d m i n i s t r a t io n 's
p ro g ram p ack ag e fo r th is le g is la tiv e s e s s io n .

c o m p re h e n siv e

farm

W ith o u t th e s e c h a n g e s, c o s ts fo r th e d a ir y p r ic e s u p p o rt p ro g ra m
w ill
in c re a se
ste a d ily ,
re a c h in g
$ 3 .2
b illio n
in 1986.
The
p ro p o s e d c h a n g e s w i l l k e e p th e p ro g ra m c o s ts a t m uch lo w e r le v e ls
o f $50 0-$6 0 0 m illio n p e r y e a r.
O u tla y s (in m illio n s o f d o lla r s )
1981
1982
1983
1984
1985
1986
C u r r e n t b a s e ......................................
P o l i c y r e d u c t i o n .......................
P r o p o s e d b u d g e t ..........................




1 ,3 2 7
1 ,7 1 7
2 ,1 2 3
2 ,4 0 8
2 ,8 3 0
3 ,2 2 8
-1 3 8 -1 ,0 9 5 -1 ,6 1 4 -1 ,8 8 7 -2 ,2 6 3 -2 ,7 2 7
1 ,1 8 9
622
509
521
567
501

4-2

Department of Agriculture

T E R M IN A T E T H E F A R M ER S HOME A D M IN IS T R A T IO N A L C O H O L F U E L S
AND B IO M A S S LOAN PROGRAM

As p a r t o f a g e n e ra l e f f o r t to re d u ce d ep en dence on
th e
F ed eral
G o v ern m en t
as
a
s u p p lie r o f c r e d it, th e P re s id e n t w ill p ro p o se
te rm in a tio n o f th e F arm ers
H om e A d m i n i s t r a t i o n
(F m H A )
a lc o h o l
fu e ls
and
b io m a ss
lo a n
p ro g ram
and re s c is s io n o f u n o b lig a te d
fu n d s th a t t o t a l a b o u t $500
m illio n .
The A d m in istra tio n
w ill
su p p o rt
c o n tin u a tio n
o f ta x in c e n tiv e s f o r a lc o h o l f u e ls , w h ic h
w i l l r e s u l t in re d u c e d T re a s u ry r e c e i p t s o f $ 4 .3 b i l l i o n
in
th e
1 98 1-86 p e rio d .
Even
in th e a b s e n c e o f F e d e r a l c r e d i t a s s i s t a n c e f o r d e v e lo p m e n t
o f a lc o h o l an d b io m a ss f u e l s , th e -A d m in is tra tio n
b e lie v e s
th a t
w o rth w h ile
p ro je c ts
w o u ld
s till
a ttra c t
p riv a te
in v e sto rs
because:
—

th e te c h n o lo g y fo r a lc o h o l
is w e ll p ro v en ;

fu e ls

an d b io m a ss

p ro d u c tio n

—

e x is tin g F e d e ra l and S ta te ta x
p o lic ie s
su b sid iz e
p ro d u c tio n
o f a lc o h o l f u e ls an d b io m a ss b y a t l e a s t
p e r b a r r e l; and

—

re m o v a l o f p r ic e c o n tr o ls fro m d o m e stic c ru d e o i l
m akes
a lc o h o l
an d b io m a ss f u e ls c o m p e titiv e w ith o th e r e n e rg y
fo rm s.

th e
$18

E x c e s s iv e p r o d u c tio n o f a lc o h o l f u e ls fro m g r a in c ro p s th a t c o u ld
r e s u l t fro m th e lo a n s u b s id y p ro g ra m m ay h a v e a d v e r s e e f f e c t s
on
fo o d
p ric e s
and a g ric u ltu ra l e x p o rt rev en u es.
In a d d itio n , th e
F e d e r a l in v o lv e m e n t m ig h t e n a b le
m a rg in a l
p ro je c ts
to
a ttra c t
p riv a te
fin a n c in g
t h a t w o u ld
o th e rw ise
go t o m o re p r o d u c t iv e
in v e s tm e n ts .
The te rm in a tio n
b u d g e t sa v in g s:




of th is

p ro g ram

4-3

w ill

re su lt

in

th e

fo llo w in g

(in m i l l i o n s o f d o l l a r s )
19 82
19 83
1984
1985

19 81

C u rren t b ase:
B udget a u th o rity

1 /.

P o lic y re d u c tio n :
B udget a u th o rity 1 /.
O u t l a y s .............................................
P ro p o sed b u d g e t:
B udget a u th o rity 1 /.
O u t l a y s .............................................

525
56

------104

------3

------4

------3

3

-5 0 5
-4 6

— -9 4

-------3

-------4

-------3

-3

20
10

——
10

-------------

-------—

------——

1 / N ew l o a n c o m m i t m e n t s .




1986

4-4

Department of Agriculture

R E D U C T IO N IN F E D E R A L F IN A N C IA L A S S IS T A N C E TO C O O P E R A T IV E S
AND P R IV A T E C O M PA N IE S A S S IS T E D BY TH E
RURAL E L E C T R IF IC A T IO N A D M IN IS T R A T IO N (R E A )

As p a rt o f a g en eral
effo rt
to
le n d in g
i n U .S . c r e d i t m a r k e ts ,
P re s id e n t p ro p o se s th e fo llo w in g

red u ce
th e
sh are
of
F ed eral
and to re d u ce F e d e ra l c o s ts , th e
c h a n g e s i n t h e REA p r o g r a m :

B e g in n in g in 1 98 2, d is c o n tin u e
F ed eral
F in a n c in g
B ank
d ire c t
le n d in g
to e le c tr ic g e n e ra tio n and tra n sm iss io n
c o o p e ra tiv e s
and
to
te le p h o n e
c o m p a n ie s
and
c o o p e ra tiv e s.
P ro v id e F e d e r a l g u a r a n te e s o f lo a n s fro m
p riv a te
so u rces
in ste a d .
T h is
a c tio n
w ill
red u ce
T r e a s u r y b o rro w in g b y $ 5 ,1 4 5 m i l l i o n in 1 9 8 2 .
R e d u c e REA d i r e c t l e n d i n g $ 1 8 7 m i l l i o n i n 1 9 8 1 a n d
$350
m illio n
in
1982
by
e lim in a tin g
lo a n s
to
te le p h o n e
c o m p a n ie s
and
c o o p e ra tiv e s
and
re d u c in g
lo a n s
to
e le c tr ic c o o p e ra tiv e s.
—
—

T hese

D i s c o n t i n u e 2% d i r e c t
a m o u n t o f 5% l o a n s .

D is c o n tin u e
5% d i r e c t
lo a n s
fo r
g e n e ra tio n
and
tra n sm iss io n f a c i l i t i e s ; s u b s titu te an e q u iv a le n t am ount
o f g u a ra n te e d p r iv a te lo a n s .

ch a n g es w ill b e a c h ie v e d

lo a n s ;

s u b stitu te

an

e q u iv a le n t

by:

d ir e c tin g th e S e c re ta ry o f th e T re a su ry
to
d isc o n tin u e
F ed eral
F in a n c in g
B ank
d ire c t
le n d in g
to
REA
b o rro w ers; 1/
s e e k in g le g is la tio n to p e rm it c h a rg in g
r a t e s f o r REA d i r e c t l o a n s ;
in s tr u c tin g th e
d ire c t
lo a n s
and e n c o u ra g in g
p riv a te le n d e rs
—

1/
—

h ig h e r

in te re st

S e c re ta ry o f A g ric u ltu re to
ta rg e t
REA
to th o s e m o st in n e e d (m o re re m o te a r e a s )
o th e r
b o rro w ers
to
seek
c re d it
fro m
; and

p r o p o s i n g b u d g e t r e s c i s s i o n s a n d a m e n d m e n t s t o b r i n g REA
d ir e c t le n d in g in to lin e w ith th e s e p ro p o se d c h a n g e s.

The A d m in istra tio n is p ro p o sin g a b ro ad
refo rm
of
F ed eral
F in a n c in g B ank o p e r a tio n s th a t w ill a f f e c t o th e r a g e n c ie s a s
w e ll,
in c lu d in g
th e
F arm ers
H om e A d m i n i s t r a t i o n a n d t h e
T en n essee V a lle y A u th o rity .




4-5

T hese p ro p o sed a c tio n s a re b ased on th e fa c t
th a t
th e
la rg e ly
a c c o m p lish e d
its
p urpo se
—
to
p ro v id e
in v e stm e n t c a p ita l n e c e s s a ry to p ro v id e
e le c tric
and
se rv ic e
in
ru ral
areas.
M o r e t h a n 99% o f a l l f a r m
e le c tr ic se rv ic e .
The b u lk
of
b o rro w in g
is
now
g e n e r a tio n an d s y s te m im p ro v e m e n ts , c o s ts t h a t s h o u ld b
sy ste m u s e r s .
In
th e
absence
o
re lia n c e o f ru ra l u
spo nsored
c re d it.
u n d e rw ritin g n e a rly
g e n e ra tio n by 1995,

REA h a s
th e
b a sic
te le p h o n e
s now h a v e
fo r
pow er
e b orne by

f
r e s t r a i n t , REA w o u ld c o n t i n u e t o e x p a n d t h e
tility
c o m p a n ie s
on
fe d e ra lly -p ro v id e d
and
It
h a s b e e n e s t i m a t e d t h a t t h e REA w o u ld b e
15% o f t o t a l U . S .
in v e stm e n t
in
e le c tric a l
if le f t unchecked.

T he m a jo r
re a s o n t h a t th e s e sy ste m s h a v e n o t c o n v e rte d to u s in g
th e p r iv a te s e c to r as
a m a jo r c a p ita l
so u rce
is
th e
h ig h ly
fa v o ra b le
te rm
s tru c tu re
— fo r b o th th e d ir e c t and g u a ra n te e d
le n d in g — o f f e r e d b y REA.
As a co n seq u en ce, th e a v a ila b ility o f
th e s e s u b sid ie s re d u ce s th e n e c e s s ity fo r re c ip ie n ts
to
im p ro v e
th e ir
fin a n c ia l
p o sitio n s
in o rd e r to a t tr a c t p riv a te c a p ita l.
C u s to m e rs o f R E A -fin a n c e d u t i l i t i e s r e c e iv e p o w er a n d
te le p h o n e
se rv ic e s
a t r a t e s t h a t a v e r a g e 8 -1 2% b e lo w c u s t o m e r s o f n o n -R E A fin a n c e d u t i l i t i e s .
T a k in g th e s e a c ti o n s w i l l
re su lt
in
a
d ra m a tic
re d u c tio n
in
d ire c t
F ed eral
le n d in g
—
$ 5 .5
b i l l i o n in 1 98 2, an d o v e r $32
b i l l i o n b e tw e e n 1982 an d 1 9 8 6 .
In
a d d itio n ,
F ed eral
in te re st
su b sid y
c o sts
w o u ld b e re d u c e d b y a b o u t $27 m i l l i o n in 1982 an d
by a b o u t $400 m illio n o v e r 1 98 2-86 .
A t th e
sam e
tim e ,
ru ral
e le c tric
and
te le p h o n e co n su m ers s e rv e d b y th e s e sy ste m s s h o u ld
c o n tin u e to r e c e iv e a d e q u a te s e r v ic e a t r a te s c o m p a ra b le to th o s e
c h a rg e d to c u s to m e rs o f n o n -R E A -fin a n c e d u t i l i t i e s .




4-6

The ch an g es a re e x p e c te d
fu n d in g 1 /:

to

re su lt

1981
C u rren t b ase:
L oan g u a ra n te e
c o m m i t m e n t s ...........................
B udget a u th o rity
a n d o u t l a y s ...........................
P o lic y re d u c tio n :
Loan g u a ra n te e
c o m m i t m e n t s ...........................
B udget a u th o rity
a n d o u t l a y s ...........................
P ro p o se d b u d g e t:
L oan g u a ra n te e
c o m m i t m e n t s ...........................
B udget a u th o rity
a n d o u t l a y s ...........................
1/
T he lo
lo a n s
w hen
th
T hese o u tla y s
A lth o u g h
th e se
th e y re p re s e n t




in

th e

fo llo w in g

(in m illio n s
1982
1983

changes

o f d o lla rs)
1984
1985

in

1986

6 ,2 4 5

6 ,2 4 5

6 ,7 4 5

7 ,2 8 0

7 ,8 7 0

8 ,5 0 0

4 ,7 7 4

5 ,7 5 2

7 ,3 8 7

7 ,5 7 1

7 ,5 2 0

7 ,8 0 0

-1 8 7

-5 ,4 9 5

-5 ,9 3 5

-6 ,4 0 5

-6 ,9 2 5

-7 ,4 8 0

-3 8

-1 ,1 4 2

-2 ,3 2 8

-3 ,6 0 3

-4 ,9 7 5

-6 ,4 5 0

6 ,0 5 8

750

810

875

945

1 ,0 2 0

4 ,7 3 6

4 ,6 1 0

5 ,0 5 9

3 ,9 6 8

2 ,5 4 5

1 ,3 5 0

a n g u a r a n t e e s o f t h e REA a r e c o n v e r t e d
to
d ire c t
ey
are
purch ased
b y th e F e d e ra l F in a n c in g B ank.
are
e x c lu d e d
fro m
th e
budget
to ta ls
by
la w .
re d u c tio n s a re n o t in c lu d e d in th e b u d g e t to ta ls ,
s ig n if ic a n t s a v in g s in F e d e ra l b o rro w in g c o s ts .

4- 7

Department of Agriculture

R E D U C T I O N I N F A R M E R S HOM E A D M I N I S T R A T I O N
D IR E C T L E N D IN G A C T I V I T I E S

As p a r t o f a g e n e ra l
effo rt
to
lim it
th e
g ro w th
of
F ed eral
o u tla y s
and
to re d u c e d ep en d e n c e on th e F e d e ra l G o v ern m en t a s a
s u p p lie r o f c r e d it, th e A d m in istra tio n
p la n s
to
red u ce
d ire c t
le n d in g
by
th e
F arm ers
H o m e A d m i n i s t r a t i o n ( F m H A ) b y a b o u t 5%
d u r i n g t h e l a s t h a l f o f 1 9 8 1 a n d a l m o s t 25% i n 1 9 8 2 .
The F arm ers
H om e A d m i n i s t r a t i o n w i l l n a r r o w i t s f o c u s t o s e r v e b o r r o w e r s
w ho
la c k
access
to
o th e r
c re d it
so u rces,
ra th e r th a n s e rv e a s a
s o u rc e o f b e lo w -m a rk e t i n t e r e s t r a te lo a n s and lo a n g u a ra n te e s to
a w id e v a r i e t y o f p r i v a t e , c r e d it- w o r th y b o r ro w e rs , a s i t h a s
in
th e re c e n t p a s t.
The
1981
b u d g et p ro v id e s
d ire c t
le n d in g
b y t h e F a r m e r s H om e
A d m in is tra tio n o f a lm o s t $13 b i l l i o n .
The
C a rte r
1982
budget
re q u e s ts
over
$10 b illio n .
A 5% r e d u c t i o n i n 1 9 8 1 w o u l d r e d u c e
th e t o t a l by a p p ro x im a te ly $565 m illio n .
The 1982
re d u c tio n
of
$ 2 .4 b i l l i o n r e s u l t s in a $ 7 .9 b i l l i o n lo a n l e v e l .
The
lo a n

change w ill in c lu d e
o b lig a tio n s:

th e

fo llo w in g m a jo r re d u c tio n s

in d ir e c t

( d o l l a r am o u n ts in m i l lio n s )
N um ber o f
P ro p o sed
N um ber o f
1982 C a rte r
B udget
Loans
Loan L evel
Loans
F arm o w n e r s h ip ...
F arm o p e r a t i n g . ..
E m erg en cy
d i s a s t e r ...........................
R ural re n ta l
h o u sin g . . . . . . . . .
M o d e ra te in c o m e
h o m e o w n e rsh ip
l o a n s ......................................
W a te r a n d w a s t e ..
C o m m u n ity
f a c i l i t i e s ....................
T o t a l .......................

$

1 ,5 0 0
1 ,5 0 0

1 6 ,4 0 0
4 4 ,4 2 0

2 ,0 0 0

$

700
1 ,3 2 5

7 ,6 5 0
3 9 ,2 4 0

3 8 ,6 1 0

1 ,6 0 0

3 0 ,9 0 8

983

1 ,3 9 0

870

1 ,2 3 0

802
575

1 9 ,7 0 0
1 ,2 3 8

500
300

1 2 ,2 8 0
645

260

613

130

305

7 ,6 2 0

1 2 2 ,3 7 1

5 ,4 2 5

9 2 ,2 4 0

The m a jo r re d u c tio n s id e n ti f ie d sh o u ld n o t
s ig n ific a n
th e
p o o re s t h o u se h o ld s
and
c o m m u n itie s.
P ro g ram s
v e ry p o o r w o u ld r e c e iv e r e l a t i v e l y s m a lle r r e d u c t io n s
t h a t p r o v id e h o m e o w n e rs h ip lo a n s t o m o d e ra te in c o m e f a
is
a n tic ip a te d th a t a ll b u t th e s m a lle st and p o o re st




4- 8

tly
affect
s e rv in g th e
th a n
th o se
m ilie s.
It
c o m m u n itie s

w ill be a b le to fin d a lte r n a tiv e so u rc e s
of
fu n d in g
fo r
ru ral
d e v e lo p m e n t p r o je c ts C o n se q u e n tly ,
e l i g i b i l i t y fo r th e w a te r
a n d w a s te lo a n p ro g ra m w i l l b e li m ite d to th o s e c o m m u n itie s
th a t
are
to o
s m a ll to p a r t i c i p a t e in th e bond m a rk e t o r a re to o p o o r
to a f f o r d a w a te r sy ste m w ith o u t g r a n t a s s is ta n c e *
I t is
a n tic ip a te d
th a t
th e
F arm
C re d it
S y ste m ,
S ta te
farm
o w n e rsh ip
p ro g ram s,
p riv a te
le n d e rs
and
th e
expanded
crop
in s u ra n c e p ro g ram w ill p ro v id e s u f f ic ie n t re s o u rc e s
to
m itig a te
t h e e f f e c t o f t h e r e d u c t i o n s i n FmHA l e n d i n g .
The
p ro p o sed
1981
r e c is s io n s o f lo a n a
on
d ire c t
le n d in g
w o u ld b e a c h ie v e d b y
1982 C a rte r b u d g e t.
T h is
p ro p o sal
fu n d in g :

is

re d u c tio n s
w o u ld
be
ac
u th o rity s p e c if ie d in th e
in th e a p p ro p ria tio n a c t;
a m e n d in g th e l i m i t a t i o n s

e x p e c te d

to

re su lt

1 ,0 5 6
-1 ,2 0 5

th e

(in m illio n s
1983
1982

1981
C u rren t base:
B udget a u th o rity ....

in

1 ,4 7 4
2 ,5 5 9

2 ,0 9 6
2 ,9 5 5

h ie v e d by p ro p o sin g
cu rren t
lim ita tio n
th e 1982 re d u c tio n s
c o n ta in e d
in
th e

fo llo w in g

o f d o lla rs)
1984
1985
2 ,5 6 8
3 ,2 3 6

D ir e c t lo a n
o b l i g a t i o n s ........................... 1 2 , 9 9 0 1 0 , 2 3 7 1 0 , 2 3 7 1 0 , 2 3 7
P o lic y re d u c tio n :
-------------3 0
-1 0 5
B udget a u th o rity ....
-3 0
-1 0 5
-1 7 9
-2 5 5
D ire c t lo a n
-5 6 5 -2 ,3 5 4 -2 ,3 5 4 -2 ,3 5 4
o b l i g a t i o n s ...........................
P ro p o sed b u d g e t:
1 ,4 7 4
2 ,0 6 6
2 ,4 6 3
1 ,0 5 6
B udget a u th o rity ....
2 ,7 7 6
2 ,9 8 1
2 ,4 5 4
1 ,1 7 5
D ir e c t lo a n
7 ,8 8 3
7 ,8 8 3
7 ,8 8 3
o b l i g a t i o n s ........................... 1 2 , 4 2 5




4-9

changes

in

1986

2 ,9 2 2
3 ,4 9 6

3 ,1 6 9
3 ,6 5 8

1 0 ,2 3 7

1 0 ,2 3 7

-1 7 9
-3 3 1

-2 5 5
-4 0 7

-2 ,3 5 4

-2 ,3 5 4

2 ,7 4 3
3 ,1 6 5

2 ,9 1 4
3 ,2 5 1

7 ,8 8 3

7 ,8 8 3

D e p a r tm e n t o f C om m erce
A p p a la c h ia n R e g io n a l C o m m issio n

REDUCTIONS TO ECONOMIC AND REGIONAL DEVELOPMENT PROGRAMS

T h e A d m i n i s t r a t i o n p r o p o s e s t o e l i m i n a t e f u n d in g f o r t h e E c o n o m ic
D e v e l o p m e n t A d m i n i s t r a t i o n (E D A )
and
th e
R e g io n a l
D e v e lo p m e n t
C o m m issio n s
of
th e
D e p a rtm e n t o f C o m m erce, a n d t h e n o n -h ig h w a y
p ro g ra m s o f t h e A p p a la c h ia n R e g io n a l C o m m issio n (A R C ).
T h ere is no c o n v in c in g e v id e n c e th a t
th e se
p ro g ram s
have
been
e ffe c tiv e
in
c re a tin g
new
jo b s
o r c a p ita l in v e stm e n t, o r a re
a c tu a lly
needed
to
p ro m o te
lo c a l
and
re g io n a l
e c o n o m ic
d e v e lo p m e n t.
S tu d ie s
in d ic a te
th a t
th e
to ta l
c o s t p e r jo b
d i r e c t l y c r e a t e d b y a n EDA d e v e l o p m e n t g r a n t i s o n t h e
o rd er
of
$ 6 0 ,0 0 0 t o $ 7 0 ,0 0 0 f o r a p e r s o n - y e a r o f e m p lo y m e n t.
S tu d ie s a lso
show
th a t
EDA p r o g r a m s
have had
little
in flu e n c e
on lo c a l
e c o n o m ic d e v e lo p m e n t s in c e s u c h d e v e lo p m e n t g e n e r a l l y w o u ld
have
o ccu rred
w ith o u t
EDA i n v e s t m e n t .
The
R e g io n a l
C o m m issio n s
d u p lic a te th e a c tiv itie s o f S ta te s and lo c a litie s th a t
have
th e
c a p a b ility
to
carry
out
re g io n a l p ro je c ts .
The p o lic y change
w i l l s a v e m o re th a n $5 b i l l i o n o v e r th e n e x t 4 -5 y e a r s .
E c o n o m ic e x p a n s io n a n d jo b c r e a t i o n i n d i s t r e s s e d a r e a s
w ill
be
s tim u la te d
th ro u g h g e n e ra l ta x , f i s c a l , and r e g u la to r y re d u c tio n
m easu res
a n d m o re
fle x ib le
c o m m u n ity
d e v e lo p m e n t
su p p o rt
a ssista n c e .
D e v elo p m en t a s s i s t a n c e
to
ru ral
areas
w ill
be
p r o v i d e d b y t h e F a r m e r s H om e A d m i n i s t r a t i o n w i t h i n t h e D e p a r tm e n t
o f A g ric u ltu re .
S p e c ific changes w ill
f o r EDA, t h e R e g io n a l
second h a lf
o f 1981
r e q u i r e a m e n d m e n ts t o
R e g io n a l
C o m m issio n
in 1982.

in v o lv e re s c in d in g re m a in in g a p p r o p r ia tio n s
C o m m i s s i o n s , a n d ARC ( n o n - h i g h w a y ) f o r
th e
and e lim in a tin g fu n d in g in 1982.
T h is w ill
t h e 1 9 8 2 b u d g e t f o r EDA a n d
ARC p r o g r a m s .
fu n d in g is a lre a d y p ro p o se d fo r te rm in a tio n

T he tr a d e a d ju s tm e n t a s s i s t a n c e p ro g ra m now lo c a te d in
EDA w i l l
b e t r a n f e r r e d t o t h e D e p a r t m e n t o f C o m m e r c e 's I n t e r n a t i o n a l T r a d e
A d m in istra tio n .
The
p ro g ram
w il l c o n tin u e to b e fu n d e d a t $51
m illio n in b u d g e t a u th o r ity in 1981 and $53 m illio n in 1 98 2.
The
A p p a la c h ia n h ig h w a y p ro g ra m w i l l b e t r a n s f e r r e d
to
th e
F ed eral
H ig h w a y A d m i n i s t r a t i o n a n d fu n d e d fro m t h e h ig h w a y t r u s t f u n d .




4-10

1981
C u r r e n t ba se :

B udget a u th o r ity .. ..

(in m i l l i o n s o f d o l l a r s )
19 82
1983
1984
1985

1986

1 ,0 0 4

P o lic y re d u c tio n :
B udget a u th o rity ..

1 ,0 3 4
1 ,0 2 3

1 ,1 3 1
1 ,0 8 0

1 ,2 2 4
1 ,1 4 5

1 ,3 1 8
1 ,2 3 9

1 ,4 0 9
1 ,3 1 2

-5 0 2

P ro p o sed b u d g e t* :
B udget a u th o rity ..

-7 6 9
-4 4 0

-8 5 4
-6 4 4

-9 3 4
-7 5 5

-1 ,0 1 0
-8 8 2

-1 ,0 8 5
-9 9 7

502

265
583

277
436

290
390

308
357

324
315

*
The p ro p o sed
b u d g e t w o u ld f u n d ARC h i g h w a y p r o g r a m s a t
$215 m illio n in 1982 and p ro v id e
fo r
th e
o rd e rly
phaseout
of
p r i o r EDA f u n d i n g c o m m i t m e n t s .




4-11

Department of Energy

R E S T R U C T U R IN G O P S Y N T H E T IC F U E L S PROGRAM S
T he P r e s id e n t i s c o m m itte d
to
e n su rin g
th e
d e v e lo p m e n t
of
a
c o m m e rc ia l
sy n th e tic
fu e ls
in d u stry
th a t
can
h e lp
re p la c e
im p o rte d o i l w ith c o m p e titiv e ly - p r ic e d d o m e stic f u e ls
m ade
fro m
our
abundant
reso u rces
of
c o a l,
o il
s h a le ,
ta r
san d s, and
re n e w a b le m a te r ia ls .
T hrou gh a
c a re fu lly -d e sig n e d ,
s tre a m lin e d
s y n th e tic
fu e ls
p ro g ram ,
th e P re s id e n t b e lie v e s we can a c h ie v e
r a p id d e v e lo p m e n t o f o u r s y n th e tic f u e ls p o t e n t i a l w ith o u t a h u g e
D e p a rtm e n t o f E n e rg y b u r e a u c ra c y an d w ith o u t n e e d le s s u s e o f
ta x
d o lla r s to s u b s id iz e p r iv a te b u sin e ss v e n tu re s .
By
s h iftin g
th e
n e w ly -c re a te d
S y
ap p ro ach
p e rm its
th e D e p a rtm e n t o f
$ 2 .7 b i l l i o n o v e r
am ount i f p ro je c t

fo cu s
o f G o v ern m en t s y n f u e ls p ro g ra m s t o th e
n th e tic
F u e ls
C o rp o ra tio n ,
th e
P r e s id e n t's
e lim in a tio n o f d u p lic a tiv e s y n fu e ls p ro g ram s a t
E n e r g y t h a t w i l l c o s t t h e t a x p a y e r a m in im u m o f
th e n e x t fiv e y e a rs — and p o s s ib ly tw ic e
th a t
o v e rru n s fo llo w h i s t o r i c a l p a tte r n s .

The
P re sid e n t
in te n d s
to
a p p o in t
new
b o ard
m em bers
to th e
S y n th e tic F u e ls C o rp o ra tio n as soo n a s p o s s ib le and a s s ig n to th e
C o rp o ra tio n th e r e s p o n s ib ility
to
a ssist
m a jo r
sy n fu el
p la n t
c o n stru c tio n
p ro je c ts .
S in c e th e s e ty p e s o f s u p p o rt w ere ch o se n
s p e c if ic a lly to en c o u ra g e th e p ro d u c tio n o f
sy n th e tic
fu e ls
by
th e
p r iv a t e s e c to r in a tim e o f r i s i n g e n e rg y p r ic e s , th e r e i s a
good chance
th a t
a
sig n ific a n t
p o rtio n
of
th e
$17
b illio n
a v a ila b le
to
th e
C o rp o ra tio n w ill n e v e r h av e to be p a id o u t to
p riv a te
c o m p a n ie s.
E n c o u ra g in g
s y n th e tic
fu e ls
p ro d u c tio n
th ro u g h
th e
S y n th e tic
F u e ls C o rp o ra tio n in s te a d o f th ro u g h th e
D e p a rtm e n t
of
E n erg y
th e re fo re
red u ces
th e
lik e lih o o d
th a t
s y n th e tic
fu e ls
p ro m o tio n
w il l becom e a m a jo r b u d g e t b u rd e n in
th e fu tu re .
S h iftin g
th e
D e p a rtm e n t
of
E n e r g y 's
sy n th e tic
fu el
c o m m e rc ia liz a tio n
and
d e m o n stra tio n a c ti v i tie s to th e S y n th e tic
F u e ls C o rp o ra tio n w ill
p ro v id e
a
m o re
e ffic ie n t
and
fo cu sed
p ro g ram
fo r
d e m o n stra tin g s y n th e tic fu e l p ro d u c tio n .
The s h if t
w ill a lso in su la te
p ro je c t
se le c tio n
fro m
th e
"p o rk
b a rre l"
p o litic a l
p ro cess.
B ecause
p riv a te
c o m p a n ie s
w ill
m anage
c o n s t r u c ti o n w ith m o re o f t h e i r ow n m oney a t r i s k u n d e r
th e
new
ap p ro ach ,
th e
lik e lih o o d o f s u c c e s s f u l p r o je c t o u tc o m e s w i l l b e
in c re a se d ,
w h ile
p o te n tia l
c o sts
fo r
th e
G o v e rn m e n t.
w ill
d ecrease.
T h is
change
i s c o n s i s t e n t w ith th e A d m i n i s t r a t io n 's
p o lic y to re ly on p riv a te
m arket
fo rces
to
set
th e
pace
of
c o m m e rc ia l
in tro d u c tio n
of
sy n th e tic
fu e ls te c h n o lo g ie s .
The
D e p a rtm e n t o f E n e rg y w i l l en d
its
p ro g ram
of
m a jo r
te c h n ic a l
d e m o n stra tio n s,
tra n sfe r
th e
in te rim a lte r n a tiv e fu e ls fu n d in g
p ro g ram
to
th e
S y n th e tic
F u e ls
C o rp o ra tio n
and
fo cu s
on
s u p p o rtin g lo n g -ra n g e r e la te d r e s e a r c h an d d e v e lo p m e n t.
As
a
re su lt
of
G o v ern m en t fu n d in g




th is
change,
c u rr e n t a rra n g e m e n ts fo r d ir e c t
o f co al liq u e fa c tio n and g a s ific a tio n p ro je c ts
4-12

w ill
be
te rm in a te d . 1 /
The
P re sid e n t
a n tic ip a te s
th a t
th e
C o rp o ra tio n
w ill
c o n sid e r s u p p o rtin g th e s e and o th e r f a c i l i t i e s
e ith e r as fu ll-s iz e d s y n th e tic fu e l
p ro je c ts
or
as
le ss
th a n
c o m m e rc ia l jo in t- v e n t u r e s .
T he s h i f t to a s y n fu e ls p ro g ram b a se d
o n t h e C o r p o r a tio n m ay a c t u a l l y e n h a n c e d o m e s tic ' e n e rg y s u p p l i e s ,
sin c e
th e
c u m u la tiv e p r o d u c tio n fro m th e a f f e c te d D e p a rtm e n t o f
E n e rg y p r o j e c t s w o u ld b e l e s s th a n 1 0 0 ,0 0 0
b a rre ls
of
o il
per
day,
w h ile
th e th e C o rp o ra tio n w ill c o n tin u e to p ro v id e su p p o rt
f o r s y n th e ti c f u e l p r o je c ts th a t c o u ld
y ie ld
equal
or
g re a te r
a m o u n ts o f s y n th e ti c f u e ls p r o d u c tio n .
The
p ro p o sal
fu n d in g :

is

e x p e c te d

to

1981
C u rren t b ase:
B udget a u th o rity *
O u t l a y s ...................................
P o lic y re d u c tio n :
B udget a u th o rity .
O u t l a y s ...................................
P ro p o sed b u d g e t:
B udget a u th o rity .
O u t l a y s ...................................
*
w ere m ade
m illio n o
re m a in d e r
on June 3
th o se p ro
1980.

The
coo
fo r
co n
und

re su lt

in

th e

(in m illio n s
1982
1983

fo llo w in g

changes

o f d o lla rs)
1984
1985

in

1986

415
275

858
864

1 ,0 6 4
859

362
676

140
224

25
256

-5 4 5
-2 7 5

-1 ,0 2 8
-8 6 4

-1 ,0 6 4
-8 5 9

-3 6 2
-6 7 6

-1 4 0
-2 2 4

-2 5
-2 5 6

-1 3 0

-1 7 0

--------

--------

--------

-------

A p p ro p ria tio n s fo r th e in te rim a lte r n a tiv e fu e ls
p ro g ram
in 1980 to be a v a ila b le in fu tu re y e a rs.
In 1981, $300
f th e s e fu n d s w ill b e p ro p o se d fo r r e s c is s io n , w h ile th e
w ill b e tr a n s f e r r e d to th e S y n th e tic F u e ls C o rp o ra tio n
0, 1981.
T he C o rp o ra tio n w ill
a lso
c o n sid e r
a d o p tin g
j e c t s f o r w h ic h fu n d s m ay b e o b l i g a t e d p r i o r t o J u n e 3 0 ,

p ro p o sed tr a n s f e
p e ra tio n w ill b e
c o n tin u ity
of
s u lta tio n s w ith c
e r o u r a g re e m e n ts




r o f p r o je c ts th a t in v o lv e in te r n a tio n a l
c a rrie d o u t in a
m anner
th a t
p ro v id e s
D e p a rtm e n t
of
E n erg y
fu n d in g p e n d in g
o o p e ra tin g p a rtn e rs
th a t
are
re q u ire d
w ith th e m .
4-13

Department of Energy

REDUCTIONS

IN F O S S I L E N E R G Y R E S E A R C H A N D D E V E L O P M E N T

In c o n ju n c tio n w ith th e
re stru c tu rin g
of
th e
sy n th e tic
fu e ls
p ro g ram ,
th e
A d m in istra tio n
p la n s
to
rev am p
fo ss il
en erg y
research
and
d e v e lo p m e n t
and
te rm in a te
c o m m e rc ia liz a tio n
a c tiv itie s
in
th e
D e p a rtm e n t o f E n e rg y .
T h i s w i l l a l l o w a 45%
re d u c tio n in
o u tla y s
w h ile
c o n tin u in g
e ffe c tiv e
su p p o rt
fo r
lo n g e r-te rm re s e a rc h w ith h ig h e r p o te n tia l re tu rn s to th e N a tio n .
The
D e p a rtm e n t
of
E n erg y
c u rre n tly
c o n d u c ts
a w id e r a n g e o f
a c t i v i t i e s aim e d a t
im p ro v in g
te c h n o lo g ie s
fo r
p ro d u c in g
and
u sin g
c o a l,
o il,
an d g as and fo r s u b s id iz in g a d o p tio n o f th o s e
te c h n o lo g ie s by p riv a te in d u s try .
C o stly n e a r-te rm a c t i v i t i e s , such a s c o n s tru c tio n
and
o p e ra tio n
of
p ilo t
p la n ts
u sin g
c o m p a n y -sp e c ific
p ro cesses,
su b sid iz e
in d iv id u a l c o m p a n ie s w h ile
p ro d u c in g
ra p id
and
u n c o n tro lla b le
g ro w th
in
th e
F ed eral
b u d g e t.
The b u d g et
in th is a re a h as
in c r e a s e d o v e r 15 tim e s th e 1974 le v e l, p r im a r ily b e c a u s e o f
th e
h ig h
c o sts
a sso c ia te d
w ith
b u ild in g
la rg e
sc a le
p ilo t
and
d e m o n stra tio n p la n ts .
T h e se G o v ern m en t o u tla y s a re le s s n eed ed a t p r e s e n t
because
th e
en erg y
in d u s try
has
s te p p e d
up
its
r e s e a r c h an d d e v e lo p m e n t
in v e s tm e n ts , h a v in g in c re a s e d i t s
1979
s p e n d in g
25%
over
th e
p re v io u s
y e a r 's
le v e l.
D e re g u la tio n
of
en erg y
p ric e s
w ill
p ro v id e a d d itio n a l in c e n tiv e s to c o n tin u e th is tre n d , w h ile o th e r
A d m in istra tio n
p o lic ie s
such
as
ta x
re lie f
and
rem o v al
of
e x c e ss iv e
re g u la to ry
b urdens
w ill
fu rth e r enhance th e p riv a te
s e c t o r 's a b i l i t y to d e v e lo p an d in tr o d u c e new te c h n o lo g ie s .
By re ly in g on p riv a te m ark et fo rc e s and
th e
ass
n e w ly
c re a te d
S y n th e tic
F u e ls
C o rp o ra tio n ,
te c h n o lo g y d e m o n s tra tio n
and
c o m m e rc ia liz a tio n
p ro c e e d w ith o u t d ir e c t F e d e ra l fu n d in g .
F ed eral
w ill th u s fo c u s on h ig h - r is k , lo n g e r-te rm , h ig h -p
th a t
th e
p riv a te
se c to r tra d itio n a lly has been
a b le to u n d e rta k e .

ista n c e
of
th e
th e
n e a r-te rm
a c tiv itie s
can
rese arch su p p o rt
ay o ff a c tiv itie s
le ss w illin g o r

T h is ch an g e in s tr a te g y w ill r e s u l t in a
le ss
c o s tly
and
m o re
e ffe c tiv e
F ed eral
research
and
d e v e lo p m e n t p ro g ra m t h a t w i l l
le a v e c o m m e r c ia liz a tio n t o p r i v a t e e n e rg y c o m p a n ie s c o m p e tin g
in
th e
m arket
p la c e .
S u b s ta n tia l b u d g e t s a v in g s w i l l r e s u l t fro m
th e a d o p tio n o f th is p o lic y as fu n d in g fo r d e sig n
and
o p e ra tio n
o f
m a jo r f o s s i l e n e rg y p i l o t an d d e m o n s tra tio n p la n ts is re d u c e d
o r e lim in a te d an d r e d u c tio n s m ade in th e n e a r-te rm
and
com panysp e c ific
r e s e a r c h an d d e v e lo p m e n t w ork in c o a l.
D e re g u la tio n o f
o il and gas w ill
a lso
p ro v id e
su ffic ie n t
in c e n tiv e s
fo r
th e
p riv a te
se c to r
to
u n d e rta k e
m any o f th e a c t i v i t i e s c u r r e n tly
fu n d ed
in
th e
p e tro le u m
and
gas
research
and
d e v e lo p m e n t
p ro g ram s.
I t i s e x p e c te d t h a t te c h n o lo g y d e v e lo p m e n t w i l l n o t b e




4-14

slo w e d
dow n
b e c a u s e m any o f th e a c t i v i t i e s now s u p p o rte d b y th e
G o v ern m en t w ill b e c o n tin u e d b y th e
p riv a te
se c to r.
In
fa c t,
th e s e
changes
w i l l m ake i t p o s s i b l e t o d e v o te m o re g o v e r n m e n ta l
r e s o u r c e s t o t r u e r e s e a r c h a s th e m o re c a p i t a l - i n t e n s i v e
a p p lie d
and
m a rk e t-o rie n te d
F ed eral
a c tiv itie s
are
sc a le d
back.
In
a d d itio n , th e a n ti-c o m p e titiv e e f fe c ts
of
G o v ern m en t
su b sid ie s
fo r
c o m m e rc ia liz a tio n
w ill be e lim in a te d , u ltim a te ly b e n e fitin g
th e c o n su m e r th ro u g h lo w e r c o s ts f o r new e n e rg y s o u r c e s .
To
a c h ie v e
th is
change
in
p o lic y ,
som e
c o n tr a c t s 'W i ll
be
te rm in a te d
and
m a jo r
re d u c tio n s
p ro p o sed
fo r
1982.
The
A d m in istra tio n w ill a ls o p ro p o se re s c is s io n s fo r 1981.
The p ro p o sa l is
fu n d in g :

e x p e c te d

to

re su lt

1981
C u rren t b ase:
B udget a u th o rity ....
O u t l a y s ..............................................
P o lic y re d u c tio n :
B udget a u th o rity ....
P ro p o se d b u d g e t:
B udget a u th o rity ....




in

th e

fo llo w in g

(in m illio n s
1983
1902

changes

o f d o lla rs)
1985
1984

in

1986

727
745

793
799

874
838

938
895

995
974

942
943

-7 0
-5 9

-3 7 3
-3 6 1

-5 2 2
-4 3 3

-6 0 5
-5 4 9

-6 7 6
-6 5 7

-6 0 2
-6 0 4

657
686

420
438

352
405

333
346

319
317

340
339

4-15

Department of Energy

E L I M IN A T IO N O F E X C E S S IV E F E D E R A L IN V O L V E M E N T I N
SO LA R ENERGY DEVELOPM ENT

S tim u la te d b y th e new
so la r
en erg y p ro d u c ts
in a c c o rd a n c e w ith th e
gas
p ric e s
p e rm itte d
w i l l rem o v e th e s u b s id
th a t
have
p re v e n te d
p o te n tia l.

F ed eral
is exp
P re sid
under
ie s fo r
so la r

s o la r ta x c r e d its , th e
m arket
fo r
a n d in g r a p id ly .
D e re g u la tio n o f o il
e n t’s p o lic y and in c re a s in g
n a tu ra l
th e N a tu ra l G as P o lic y A ct o f 1978
c o m p e tin g o i l an d g a s
te c h n o lo g ie s
en erg y
fro m
a c h ie v in g
its
tru e

In
th is
new ,
h e a lth ie r
e n v iro n m e n t
te c h n o lo g ie s ,
th e P re sid e n t b e lie v e s
f o c u s o f t h e D e p a r tm e n t o f E n e r g y 's s o
c o s tly
n e a r-te rm
d e v e lo p m e n t,
c o m m e rc ia liz a tio n e f f o r ts
and
in to
d e v e lo p m e n t p r o je c ts
th a t
are
to o
u n d e rta k e .
T o ta l F ed eral su p p o rt fo r so la
u n d e r th e P r e s id e n t’s p ro p o s a l
c re d its,
w h ic h
a re e x p e c te d
b u sin e ss in v e s to rs
in
so la r
b e tw e e n 1981 an d 1 9 8 6 .

fo r
c o m m e rc ia l
s
i t is p o ssib le to s h if t
la r
a c tiv itie s
aw ay
d e m o n stra tio n ,
lo n g e r-ra n g e
research
ris k y fo r p riv a te firm

o la r
th e
from
and
and
s to

r

e n e rg y w il l re m a in e x tre m e ly h ig h
due to
c o n tin u a tio n
of
th e
ta x
to re d u ce ta x e s fo r r e s id e n tia l and
en erg y
sy ste m s
by
$ 2 .6
b illio n

The
A d m in istra tio n
w ill
c o n tin u e d i r e c t G o v ern m en t s u p p o r t f o r
so la r
p ro g ram s
fo cu sed
on
advanced
research
c o n c e p ts
and
e x p lo r a to r y d e v e lo p m e n t, b u t assu m es t h a t th e p r iv a te s e c to r w il l
be
re sp o n sib le
f o r d e v e lo p in g m a rk e ta b le sy s te m s o n c e te c h n i c a l
fe a s ib ility is e sta b lish e d .
The A d m in istra tio n w ill
p erm an en t
fa c ility
fo r
th e
m issio n
of
th e
o
a p p ro p ria te s ta ffin g le v

a ls o p ro p o se d e fe rrin g c o n s tru c tio n o f
a
th e S o la r E n erg y R eserch I n s t i t u t e u n t i l
rg a n iz a tio n
is
b e tte r
d e fin e d
and
an
e l ag reed upon.

By p la c in g
g r e a t e r e m p h a sis on th e p r iv a t e s e c t o r in d e v e lo p in g
an d m a rk e tin g s o l a r p r o d u c ts . D e p a rtm e n t o f E n e rg y s o la r s p e n d in g
c a n b e r e d u c e d b y m o r e t h a n 60% i n 1 9 8 2 , w i t h c u m u l a t i v e
sa v in g s
of
n e a rly
$ 1 .9
b illio n
by
th e
end
of
1986.
T h is
can be
a c c o m p lish e d w ith o u t a f f e c ti n g th e F e d e ra l
G o v e r n m e n t's
su p p o rt
fo r
lo n g e r-te rm
r e s e a r c h o n e m e rg in g s o la r te c h n o lo g ie s .
T hese
b u d g e t c h a n g e s w i l l h a v e l i t t l e e f f e c t on s o la r e n e rg y u s e , w h ic h
w ill c o n tin u e a h e a lth y r a te o f
in c re a se
over
tim e
as
risin g
c o n v e n tio n a l en e rg y p ric e s and s o la r ta x in c e n tiv e s s tim u la te th e
dem and f o r s o la r p ro d u c ts .
The
p ro p o sal
changes:




is

e x p e c te d

to

re su lt

4-16

in

th e

fo llo w in g

fu n d in g

1981
C u r r e n t base:

B udget a u th o rity ....
O u t l a y s ..............................................
P o lic y re d u c tio n :
B udget a u th o rity ....
O u t l a y s ..............................................
P ro p o se d b u d g e t:
B udget a u th o r ity ... .
O u t l a y s ..............................................
A ddendum :
S o la r ta x c re d its
(e x c lu d in g a lc o h o l
fu e ls an d b io m a ss).




(in m i l l i o n s o f d o l l a r s )
1982
1983
1984
1985

1986

577
589

583
589

664
650

623
657

595
595

553
553

-9 9
-7 9

-3 6 3
-3 6 5

-4 2 8
-4 1 4

-3 7 2
-4 0 6

-3 3 0
-3 3 0

-2 7 5
-2 7 5

479
510

220
224

236
236

251
251

265
265

278
278

128

216

334

466

682

796

4-17

Department of Energy

R E D U C T IO N O P S U B S I D I E S FO R ENERGY S U P P L Y PROGRAM S

T h e A d m i n i s t r a t i o n w i l l p r o p o s e a 34% r e d u c t i o n i n e n e r g y
su p p ly
p ro g ram s
in g e o th e rm a l, en e rg y s to ra g e , e l e c tr i c en e rg y sy ste m s,
e n e rg y im p a c t a s s i s t a n c e , e n v iro n m e n ta l s t u d i e s , u ra n iu m r e s o u r c e
a sse ss m e n ts and h y d ro p o w er as
p art
of
th e
g en eral
e ffo rt
to
e m p lo y
m arket
fo rces
in ste a d
o f b u re a u c ra tic a lly -a d m in iste re d
p ro g ram s to a c h ie v e
n a tio n a l
en erg y
g o a ls.
T hese
re d u c tio n s
w ill:
te r m in a te g e o th e rm a l lo a n g u a ra n te e s th a t
t o r e a l l o c a t e c a p i t a l fro m m o re p r o d u c tiv e
--

serv e
m e re ly
in v e s tm e n ts ;

e lim in a te fu n d in g
fo r
a d d itio n a l
G o v e rn m e n t-su p p o rte d
c o m m e rc ia liz a tio n
of
g e o th e rm a l
te c h n o lo g ie s th a t can
an d sh o u ld b e su p p o rte d by th e p riv a te s e c to r ;
e lim in a te e n e rg y im p a c t a s s is ta n c e g r a n ts to th e
S ta te s
th a t
d u p lic a te o th e r F e d e ra l p ro g ram s and u n n e c e s s a rily
assum e
re sp o n s ib iliy
fo r
a c tiv itie s
th a t
are
m o re
a p p r o p r ia te ly u n d e rta k e n by S ta te an d lo c a l g o v e rn m e n ts;
e lim in a te
d e v e lo p m e n t an d
d e m o n stra tio n
p ro g ram s
in
e le c tric
e n e rg y sy ste m s an d e n e rg y s to r a g e t h a t c a n an d
sh o u ld be s u p p o rte d by th e p riv a te s e c to r ;

—

te rm in a te e n v iro n m e n ta l s tu d ie s th a t a re in e f f e c tiv e an d
d u p lic a te e f f o r t s a t th e E n v iro n m e n ta l P r o te c tio n A gency
and o th e r F e d e ra l a g e n c ie s;
p h a s e o u t u ra n iu m r e s o u rc e a s s e s s m e n t a c t i v i t i e s
t h i s p ro g ram is no
lo n g e r
n ecessary
to
m eet
n o n p ro life ra tio n o b je c tiv e s ; and

—

te rm in a te s u b s id
d e m o n stra tio n s
p ro v id e d th ro u g h
c r e d it p ro g ram s

By
fo c u sin g
D e p a rtm
h ig h -ris k
research ,
m illio n o v e r th e n e x t
m eet
th e se
c rite ria
T h ere w ill b e l i t t l e

ie s fo
sin c e
a 21%
in th e

r a l l a d d itio n a l sm a ll h y d ro p o w er
s u ff ic ie n t in c e n tiv e s a re a lre a d y
in v e stm e n t ta x c r e d it an d th ro u g h
D e p a rtm e n t o f A g r ic u ltu r e .

ent
of
E nerg y
p ro g ram s
o u tla y s
can
be red u ced
fiv e y ea rs.
V a rio u s p r o
w ill
be
p hased o u t in
im p a c t on d o m e stic e n e rg y

on
lo n g
by a to ta l
je c ts th a t
an o rd e rly
s u p p lie s .

To a c h ie v e th is p o lic y ch an g e, th e
A d m in istra tio n
w ill
re sc issio n s
of
1981
fu n d s
and
red u ce
its
req u est
a p p ro p ria tio n s.
T he c h a n g e s in fu n d in g a r e show n b e lo w :




because
n u c le a r

4-18

e r-te rm ,
o f $861
do
not
m an n er.
p ro p o se
fo r 1982

1981
C u rr en t base:

B udget a u th o rity ...
O u t l a y s ..........................................
P o lic y re d u c tio n :
B udget a u th o r ity ...
O u t l a y s ..........................................
P ro p o sed b u d g e t:
B udget a u th o rity ...
O u t l a y s ..........................................




(in m i l l i o n s o f d o l l a r s )
1982
1983
1984
1985

1986

662
598

551
605

559
559

583
572

596
585

624
610

-1 4 8
-3 7

-1 8 6
-1 5 6

-1 7 8
-1 7 7

-1 7 8
-1 7 0

-1 6 9
-1 5 8

-1 7 6
-1 6 3

514
561

365
449

381
382

405
402

427
427

448
447

4-19

Department of Energy

REDUCTION OF ENERGY CONSERVATION PROGRAMS

M o tiv a te d b y r i s i n g e n e rg y
c o sts
and
su b sta n tia l
F ed eral
ta x
c re d its,
in d iv id u a ls,
b u sin e sse s
and o th e r
in stitu tio n s
are
u n d e rta k in g
m a jo r
c o n se rv a tio n
e ffo rts.
E v id e n c e
of
th e se
c o n se rv a tio n e f f o r ts is c le a r.
In th e 6 y e a rs a f t e r th e A rab o i l
em b argo ,
t o t a l e n e r g y c o n s u m p tio n in c r e a s e d o n ly 6% , c o m p a re d t o
a n i n c r e a s e o f 29% i n t h e 6 y e a r s p r i o r
to
th e
em b argo .
W ith
risin g
en erg y
p ric e s
s in c e
th e
o il
em b argo
in 1973, en erg y
c o n su m p tio n p e r d o l l a r o f o u tp u t h a s s te a d i l y d e c lin e d e v e ry y e a r
s i n c e , d e c r e a s i n g b y a t o t a l o f 9% .
D e c o n tro l o f o i l p r ic e s
and
c o n tin u a tio n
of
ta x c r e d its can b e e x p e c te d to a c c e le r a te th e s e
tre n d s .
Som e F e d e r a l c o n s e r v a tio n
p ro g ram s
are,
th e re fo re ,
no
lo n g e r
n e c e s s a r y , w h i le o t h e r s m ay im p e d e p r i v a t e i n i t i a t i v e b y im p o s in g
to o g re a t a re g u la to ry b u rd en on th e p u b lic .
S e le c te d , lo n g -te rm
research
and
d e v e lo p m e n t
a c t i v i t i e s a re n eed ed , h o w ev er, as is
a s s i s t a n c e t o s c h o o ls a n d h o s p i t a l s a n d lo w -in c o m e p e o p le w ho d o
n o t b e n e f it fro m ta x c r e d it s .
The
P re sid e n t
is
p ro p o sin g
no change
in
c o n s e r v a tio n ta x c r e d i t , w h ic h is e x p e c te d to
$739 m illio n in su p p o rt o f p riv a te c o n se rv a tio n
1981
and
$799
m illio n d u rin g 1982.
The p ro p
D e p a rtm e n t o f E n e rg y c o n s e rv a tio n
a c tiv itie s
d ecrease
of
le ss
th a n
20% i n t o t a l F e d e r a l
c o n s e rv a tio n in 1982.

th e c u rre n t en erg y
p ro v id e
a t
le a s t
a c ti v i tie s d u rin g
o sed re d u c tio n s in
th u s
rep resen t
a
su p p o rt fo r en erg y

P ro g ram
re d u c tio n s
are
p ro p o sed
fo r
th e
th re e
ty p e s
of
c o n se rv a tio n
p ro g ram s
c o n d u c te d
by
th e
D e p a rtm e n t o f E n e rg y :
te c h n o lo g y d e v e lo p m e n t, re g u la tio n and in fo rm a tio n , and f i n a n c ia l
a s s i s t a n c e to S ta te a n d lo c a l g o v e rn m e n t.
T e c h n o lo g y d e v e lo p m e n t
p ro je c ts
th a t
can
be
c o m m e rc ia lly
v ia b le
w ith o u t
F ed eral
a ssista n c e
w ill
be
te rm in a te d .
T h ese p r o je c ts in c lu d e w ork on
e n e rg y fro m u rb a n w a s te , consum er p ro d u c ts ,
advanced
a u to m o tiv e
e n g in e
d e s ig n ,
e le c tric
and h y b rid
v e h ic le s , and in d u e tric a l
p ro cesses.
O th e r h ig h p o te n tia l p r o je c ts th a t a re u n lik e ly to b e
su p p o rte d b y th e p r iv a te s e c to r a lo n e b e c a u se th e y a re h ig h
risk
an d lo n g te rm , o r a p p ly to m any in d u s t r i e s , w il l b e r e ta in e d .
R e g u la to ry
p ro g ram s
m a n d a tin g b u ild in g an d a p p lia n c e e f f i c i e n c y
s ta n d a rd s an d u t i l i t y c o n se rv a tio n s e rv ic e s
have
sm a ll
F ed eral
c o s ts,
but
if
u n d e rta k e n
as
p la n n e d
by
th e
p re v io u s
a d m i n i s t r a t i o n , th e y w o u ld im p o se m a s s iv e r e g u l a t o r y
b u rd en s
on
th e
p riv a te se c to r.
T h ey w o u ld b e a n ig h tm a r e t o a d m i n i s t e r a n d
en fo rce.
T h e re fo re , th e s e p ro g ram s
a lso
w o u ld
be
e lim in a te d .
C o n su m ers
a lre a d y
a r e d e m a n d in g a n d m a n u f a c tu r e r s a r e p r o d u c in g
m o re e n e r g y e f f i c i e n t
p ro d u c ts
and b u ild in g s
w ith o u t
F ed eral
sta n d a rd s.
S im ila rly ,
w h ere
c o n se rv a tio n
is
an
e c o n o m ic
a l t e r n a t i v e t o new g e n e r a tin g c a p a c ity , u t i l i t i e s a r e
d e v e lo p in g




4-20

th e ir
own c o n s e r v a tio n
p ro g ram s.
The
in te rn a l c o n se rv a tio n e f f o r ts and
c e rta in
w o u ld b e r e t a i n e d .

F ed eral
G o v e r n m e n t 's
in fo rm a tio n
p ro g ram s

F in a n c ia l
a ssista n c e
to S ta te and lo c a l g o v ernm ent c o n s e rv a tio n
p ro g ram s w ill b e red u ced
and
re stru c tu re d .
G ra n ts
fo r
S ta te
en erg y
o ffic e s
and p u b lic o u tre a c h p ro g ram s w ill be e lim in a te d .
T h e se p ro g ra m s h a v e c r e a te d new b u r e a u c r a c ie s w h ile d o in g
little
to
p ro m o te
c o n se rv a tio n .
C u rre n t p u b lic
aw a ren ess o f en erg y
c o n s e rv a tio n b e n e f its and th e h ig h le v e l o f p r iv a te in v e s tm e n t in
en e rg y c o n se rv a tio n c le a rly
show
th a t
th e se
p ro g ram s
do
not
ju stify
F ed eral
su p p o rt.
G ra n ts fo r c o n s e rv a tio n a c t i v i t i e s in
p u b lic an d n o n -p ro fit sc h o o ls and h o s p ita ls w ill
c o n tin u e
a t
a
red u ced
ra te
of
a p p ro x im a te ly $100 m illio n .
T hese g ra n ts have
p ro v ed
th e ir
v a lu e
in
fin a n c in g
c o s t-e ffe c tiv e
c o n se rv a tio n
im p ro v e m e n ts
in
p u b lic
fa c ilitie s
not
e lig ib le
fo r
ta x
in c e n tiv e s .
F in a lly ,
th e
E n erg y
D e p a r tm e n t's
w e a th e riz a tio n
a ssista n c e
p ro g ram
w ill
b e in c o r p o r a te d i n t o th e D e p a rtm e n t o f H o u sin g an d
U rb a n D e v e l o p m e n t's c o m m u n ity d e v e lo p m e n t
b lo c k
g ran t
p ro g ram .
L o w -in c o m e hom e w e a th e r i z a tio n a c t i v i t i e s w i l l th u s c o n tin u e , b u t
m o re in a c c o rd w ith lo c a l n e e d s an d p r i o r i t i e s .
C u rre n tly , ab o u t
o n e - t h i r d o f c o m m u n ity d e v e lo p m e n t b lo c k g r a n t f u n d s , o r a b o u t $1
b illio n
a n n u a lly ,
is
t a r g e t e d b y r e c i p i e n t c o m m u n itie s t o som e
fo rm o f
re h a b ilita tio n .
C o m b in in g
th e
D e p a rtm e n t
of
E n erg y
w e a t h e r i z a t i o n p ro g ra m w ith t h e c o m m u n ity d e v e lo p m e n t b lo c k g r a n t
is
one
e x a m p le o f A d m in is tr a tio n e f f o r t s t o s h i f t r e s o u r c e s a n d
d e c isio n m a k in g a u th o rity to S ta te and lo c a l
g o v e rn m e n ts
th ro u g h
b lo c k
g ra n ts
an d p ro g ram s im p lif ic a tio n w h e re v e r p o s s ib le .
The
e x istin g
D e p a rtm e n t
of
E n erg y
p ro g ram
has
been
p la g u e d
by
in c re a sin g
c o s ts
and
q u a lity
c o n tro l
p ro b le m s.
As c u rre n tly
s t r u c t u r e d , th e D e p a rtm e n t o f E n e rg y p ro g ra m
w o u ld
ta k e
50-10 0
y e a r s t o r e a c h a l l th e p o t e n t i a l l y e l i g i b l e lo w -in c o m e h o u s e h o ld s
in
th e
N a tio n .
By s h iftin g
a d m in istra tiv e
re sp o n sib ility
e n t i r e l y t o th e lo c a l l e v e l , c o m m u n itie s w i l l b e a b le
to
d e v is e
w e a th e riz a tio n
e ffo rts
m ost
a p p ro p ria te
to
th e ir
needs
and
c irc u m s ta n c e s
and
a c h ie v e
g re a te r
le v e ls
of
e ffic ie n c y
and
p ro d u c tiv ity .
To
a c h ie v e
th e s e p o lic y ch a n g es, a p p ro p ria te a d ju stm e n ts to th e
1981 an d 1982 b u d g e ts w ill b e p ro p o se d .
A lso , w h ere a p p ro p r ia te ,
re g u la tio n s
now
in
effe ct
or
under
c o n sid e ra tio n
w ill
be
w ith d ra w n
and
a m e n d m e n ts
to
le g is la tio n w ill be p ro p o sed .
By
e lim in a tin g
u n n ecessary
c o n se rv a tio n
p ro g ram s
and
by
b e tte r
ta rg e tin g
re m a in in g
e f f o r t s , D e p a rtm e n t o f E n e rg y p ro g ra m c o s ts
c a n b e r e d u c e d b y n e a r l y 10% i n 1 9 8 1 , b y n e a r l y 40% i n 1 9 8 2 ,
and
b y a t o t a l o f n e a rly $ 2 .4 b i l l i o n b y th e en d o f 1 9 8 6 .
T he fu n d in g ch ang es p ro je c te d
su m m a riz e d b e lo w :




as a r e s u lt o f th e se

4-21

re d u c tio n s

are

1981

C u rre n t, b a s e :
B udget a u th o rity ....
O u t l a y s ..............................................
P o lic y re d u c tio n :
B udget a u th o rity ....
P ro p o se d b u d g e t:
B ud g et a u th o rity ... .
O u t l a y s ..............................................
ADDENDUM :
E n erg y c o n se rv a tio n




(in m i l l i o n s o f d o l l a r s )
1982
1983
1984
1985

1986

800
729

872
799

779
925

601
776

545
604

542
542

-2 5 4
-6 6

-6 7 7
-3 1 0

-5 9 7
-6 1 1

-4 2 7
-5 8 9

-3 7 4
-4 3 3

-3 7 3
-3 7 3

546
663

195
489

182
314

174
187

171
171

169
169

739

799

709

594

465

351

4-22

D e p a r t m e n t of Ener gy

REDUCTION OF ALCOHOL FUELS SUBSIDIES

The
A d m in istra tio n
w ill
p ro p o se
te rm in a tio n
of
fe a s ib ility
stu d ie s,
c o o p e ra tiv e
a g re e m e n ts an d lo a n g u a ra n te e s fo r a lc o h o l
f u e l s a n d b io m a ss e n e rg y
d e v e lo p m e n t
as
p art
of
th e
g en eral
e ffo rt
to
ad o p t m arket p rin c ip le s
to a c h ie v e n a tio n a l en e rg y
g o a ls.
The p ro p o sed change re d u ce s th e le v e l
of
su b sid ie s
fo r
a lc o h o l
fu e ls
an d b io m a ss p ro g ra m s .
Tax c r e d its w ill c o n tin u e ,
w h ic h , in th e c a s e o f a lc o h o l f u e ls , w il l r e s u l t in a s u b s id y
of
o v er $18 p e r b a r r e l.
The re m o v al o f p r ic e c o n tr o ls fro m d o m e stic
crud e
o i l w i l l m ake a lc o h o l f u e l s m o re c o m p e titiv e a n d e lim in a te
th e
need
fo r
a d d itio n a l
su b sid ie s
th ro u g h
lo a n
g u a ra n te e s,
f e a s i b i l i t y s tu d ie s , and c o o p e ra tiv e a g re e m e n ts.
As
a
re su lt o f
o f E n erg y fo r f e
lo a n
g u a ra n te e
h a v e t o c o m p e te
en erg y p ro je c ts .

t h i s c h a n g e , p r o je c ts s e le c t e d b y th e D e p a rtm e n t
a s ib ility stu d ie s,
c o o p e ra tiv e
a g re e m e n ts,
and
aw ard s w ill n o t b e fu n d e d .
T hese p ro je c ts w ill
fo r fin a n c in g in p r iv a te m a rk e ts a lo n g w ith o th e r

To a c h ie v e th is p o lic y ch an g e, th e A d m in istra tio n w ill p ro p o se
a
re sc is sio n
of
$745
m illio n o f fu n d s a p p ro p ria te d in 1980.
The
fu n d in g c h a n g e s a r e show n b e lo w :

1981
C u rren t b ase:
B udget a u th o rity ....
P o lic y re d u c tio n :
B udget a u th o rity ....
P ro p o sed b u d g e t:
B udget a u th o rity ... •
A ddendum :
T ax c r e d its and e x c is e
ta x e x e m p tio n f o r




(in m illio n s
1982
1983

o f d o lla rs)
1984
1985

1986

0
114

0
29

0
13

0
15

0
15

0
15

-7 4 5
-1 1 4

0
-2 9

0
-1 3

0
-1 5

0
-1 5

0
-1 5

-7 4 5
0

0
0

0
0

0
0

0
0

0
0

292

431

628

900

1 ,0 6 5

992

4-23

Housing and Ur ba n D e ve lo pm en t

E L IM IN A T IO N O P T H E SO LA R EN ER G Y AND EN ERG Y C O N SE R V A T IO N BANK

T h is new G o v ern m en t s p e n d in g
p ro g ram ,
in te n d e d
p rim a rily
to
p ro m o te
re sid e n tia l
en erg y
c o n se rv a tio n
and
s o la r te c h n o lo g y
in v e stm e n ts
th ro u g h
su b sid ie s,
w ill
not
be
sta rte d
up.
S u b s ta n tia l
e c o n o m ic
in c e n tiv e s
a lre a d y
e x ist
fo r
such
in v e stm e n ts as a r e s u lt o f r is in g en e rg y p r ic e s
and
sig n ific a n t
ta x
c re d its
fo r
re sid e n tia l
en erg y
c o n s e r v a tio n im p ro v e m e n ts
(1 5 % ) a n d s o l a r t e c h n o l o g y m e a s u r e s (4 0 % ).
T h ere is no re a so n to
c re a te y e t a n o th e r
F ed eral
p ro g ram
w ith
F e d e ra l o v erh ead
to
p ro m o te
th e se
sam e
o b je c tiv e s.
T h erefo re,
im p le m e n tin g
r e g u la tio n s h a v e b e e n w ith d ra w n an d w ill n o t b e p u b lis h e d , an d no
lo a n s u b s id ie s w i l l b e
d isb u rs e d .
To th e
e x te n t
th a t
lo c a l
g o v e rn m e n ts d e s i r e t o a s s i s t c e r t a i n g ro u p s — su c h a s lo w -in c o m e
h o u se h o ld s
—
w ith
e n e r g y c o n s e r v a ti o n , th e y c a n u s e c o m m u n ity
d e v e lo p m e n t b lo c k g r a n t fu n d s .
T he 1981 a p p ro p ria tio n o f o v e r $121 m illio n w ill b e p ro p o se d
re sc issio n .
The
1982 b u d g e t w ill
b e am ended to w ith d ra w
a p p ro p ria tio n re q u e ste d by th e C a rte r a d m in is tra tio n .
The p ro p o sa l is
fu n d in g :

e x p e c te d to

re s u lt in

P o lic y re d u c tio n :
B udget a u th o rity ...
P ro p o sed b u d g e t:
B udget a u th o rity ...
O u t l a y s ..........................................




fo llo w in g

(in m illio n s
1983
1982

1981
C u rren t b ase:
B udget a u th o r ity ...

th e

changes

o f d o lla rs)
1984
1985

fo r
th e
in

1986

121
47

132
149

141
137

150
147

158
157

166
162

-1 2 1
-4 7

-1 3 2
-1 4 9

-1 4 1
-1 3 7

-1 5 0
-1 4 7

-1 5 8
-1 5 7

-1 6 6
-1 6 2

-------------

-------

——

MW

---------------

4-24

_____

Housing and Urban Development

RESTRUCTURING HUD's COMMUNITY DEVELOPMENT

SUPPORT ASSISTANCE

C u rre n tly
th e
D e p a rtm e n t
of
H o u sin g
and
U rb an
D ev elo p m en t
p ro v id e s
f i n a n c ia l s u p p o rt d i r e c t l y to lo c a l g o v e rn m e n ts to h e lp
f i n a n c e g e n e r a l c o m m u n ity
d e v e lo p m e n t
a c tiv itie s
and
s p e c ific
e c o n o m ic
d e v e lo p m e n t p r o j e c t s t h r o u g h t h e C o m m u n ity D e v e lo p m e n t
B l o c k G r a n t (C D B G ) a n d t h e U r b a n D e v e l o p m e n t A c t i o n G r a n t
(U D A G )
p ro g ram s.
W h i l e c o m m u n i t i e s c a n u s e t h e i r CDBG f u n d s f o r a b r o a d
rang e
o f c o m m u n ity a n d e c o n o m ic d e v e lo p m e n t p u r p o s e s , n o t a l l o f
t h e e c o n o m i c d e v e l o p m e n t a c t i v i t i e s e l i g i b l e f o r UDAG f u n d i n g c a n
b e s u p p o r t e d u n d e r C D B G . T h e UDAG p r o g r a m , o n
th e
o th e r
hand,
c u r r e n tly re q u ire s an e x c e ss iv e am ount o f F e d e ra l in te rv e n tio n in
d e v e lo p in g ,
s e l e c t i n g , a n d m o n ito r in g l o c a l e c o n o m ic d e v e lo p m e n t
p ro je c ts .
T he R ea g a n A d m in is tr a tio n w i l l s e e k to rem ed y th e s e
d e fic ie n c ie s
by
d e v e lo p in g
new
p o lic ie s
to in te g r a te th e s e p ro g ram s in to a
m o re e f f i c i e n t a n d f l e x i b l e g r a n t m e c h a n ism .
T h is
e ffo rt
w ill
b u ild
on
th e
b est
fe a tu re s
of
b o th
p ro g ra m s t o im p ro v e th e
d e liv e ry o f F e d era l re so u rc e s fo r th e se p u rp o ses and
to
p ro v id e
t h e m a x im u m d e g r e e o f f l e x i b i l i t y f o r l o c a l g o v e r n m e n t s .
C u rren t
re stric tio n s
on
t h e u s e o f CDBG f u n d s f o r c o m m e r c i a l a c t i v i t i e s
w ill be lib e ra liz e d .
The
UDAG e m p h a s i s
on
se c u rin g
p riv a te
se c to r
fin a n c ia l
in v o lv e m e n t
in
lo c a l
e c o n o m ic
d e v e lo p m e n t
p ro je c ts w ill be re in fo rc e d .
T hese
p ro p o sed
p ro g ram
re v isio n s
w ill
re d u c tio n s
show n
fo r
th is
fu n c tio n
to
c o m m u n itie s w ith m in im a l a d v e rs e im p a c t.

p e rm it
th e
fu n d in g
be
ab sorbed by lo c a l

_____________ ( i n m i l l i o n s
1981
1982
1983
C u rren t b ase:
B udget a u th o rity
O u tla y s. . . . . . . . .
P o lic y re d u c tio n s
B udget a u th o rity
O u t l a y s ...............................
P ro p o se d b u d g e t:
B udget a u th o rity
O u t l a y s ...............................




o f d o l l a r s ) _______________
1984
1985
1986

4 ,7 5 0
4 ,6 2 5

5 ,0 9 7
4 ,5 3 4

5 ,4 1 3
4 ,8 3 2

5 ,7 1 0
5 ,1 7 1

5 ,9 9 6
5 ,4 8 5

--------

-5 8 4
-1 2

-6 7 8
-6 7

-8 3 7
-2 7 1

-8 8 2
-7 0 2

-9 2 6
-8 1 4

4 ,3 7 0
4 ,2 0 3

4 ,1 6 6
4 ,6 1 3

4 ,4 1 9
4 ,4 6 7

4 ,5 7 6
4 ,5 6 1

4 ,8 2 8
4 ,4 6 9

5 ,0 7 0
4 ,6 7 1

4 ,3 7 0
4 ,2 0 3

4-25

Department of Labor

P H A S E O U T O P C O M P R E H E N S IV E EM PLO Y M EN T AND T R A I N IN G A C T
(C E T A ) P U B L IC S E R V IC E JO B S

T he A d m in is tra tio n p ro p o se s p h a sin g o u t by th e end o f f i s c a l y e a r
1 9 8 1 t h e tw o CETA p ro g r a m s
th a t p ro v id e
fu n d s
fo r
su b sid iz e d
p u b lic
se c to r
e m p lo y m e n t
(P S E ) i n S t a t e a n d l o c a l g o v e r n m e n ts *
T h e r e d u c t i o n i n PSE w i l l r e t u r n CETA t o i t s o r i g i n a l p u r p o s e
of
im p ro v in g
th e
e m p lo y a b ility
of
th e
lo w -in c o m e /
s tru c tu ra lly
u n e m p lo y e d b y p r o v i d in g th e m w ith s k i l l s t h a t a r e
m a rk e ta b le
in
th e
p riv a te
se c to r.
P u b lic
se rv ic e
e m p lo y m e n t p r o g r a m s , b y
c o n tra s t, p ro v id e l i t t l e s k ills tra in in g .
T he w ork
e x p e rie n c e
th a t
PSE p a r t i c i p a n t s
re c e iv e
in
p u b lic
s e c to r jo b s h a s n o t
h e lp e d m o st o f th e m in s e e k in g p r i v a t e s e c t o r
e m p lo y m e n t,
o fte n
because
th e
ty p e s o f jo b s th e y g e t in th e p u b lic s e c to r h a v e n o
c o u n te rp a rts in th e p riv a te s e c to r.
In th e s h o rt ru n , th e
a b ility
o f CETA t o
enhance
e m p lo y m e n t
p ro sp e c ts
in
th e
p riv a te
se c to r
can
be
stre n g th e n e d
by
c o o r d i n a t i n g t h e c u r r e n t CETA t r a i n i n g p ro g r a m s m o re c l o s e l y w i t h
th e e x i s t i n g T i t l e V II p ro g ra m , w h ic h is in te n d e d t o in c r e a s e th e
i n v o l v e m e n t o f t h e p r i v a t e s e c t o r i n CETA t r a i n i n g p r o g r a m s .
For
t h e l o n g e r te r m , CETA w i l l b e re v ie w e d in i t s e n t i r e t y w it h
th is
e n d i n m in d b e f o r e t h e 1 9 8 3 b u d g e t i s s u b m itte d t o t h e C o n g r e s s .
CETA w a s
o r i g i n a l l y in te n d e d to p r o v id e t r a i n i n g a n d e m p lo y m e n t
o p p o rtu n itie s
d e s ig n e d
to
im p ro v e
th e
lo n g -te rm
e m p lo y m e n t
p ro sp e c ts
of
th e d is a d v a n ta g e d an d s t r u c t u r a l l y u n e m p lo y e d .
In
th e 1 9 7 4 -7 5 r e c e s s io n , h o w e v e r, th e r e l a t i v e l y s m a ll PSE p ro g ra m
a u th o riz e d
by
T itle
II
o f th e
o rig in a l
le g isla tio n
w as
d ra m a tic a lly ex p an d ed , in o rd e r to
advance
th e
"g o v ern m en t a s
e m p lo y e r o f l a s t r e s o r t " p h ilo s o p h y th e n p r e v a le n t am ong m anpow er
th e o rists.
S u b se q u e n tly ,
th e
T itle
VI p ro g ram w as c r e a te d to
enhance
th e
"c o u n te r-c y c lic a l"
th ru st
of
p u b lic
se rv ic e
e m p lo y m e n t.
PSE h a s p ro v e n t o b e a p o o r c o u n t e r - c y c l i c a l d e v ic e .
H ig h l e v e l s
o f PSE e m p lo y m e n t w e re r e a c h e d o n ly in 1 9 7 7 -7 8 a f t e r t h e d e p th o f
th e
197 4-75
re c e ss io n
had
lo n g p a s s e d .
C o n s id e ra b le e v id e n c e
in d ic a te s , m o reo v er, th a t th e n e t
jo b
c re a tio n
im p a c t
of
PSE
p ro g ram s
has
b e e n r e l a t i v e l y sm a ll in th e lo n g e r te rm .
S ev eral
s tu d ie s h av e show n th a t a h ig h
p ro p o rtio n
o f CETA e m p lo y m e n t
s u p p l a n t s , r a t h e r th a n a u g m e n ts , h i r i n g s t h a t w o u ld h a v e o c c u r r e d
re g a rd le ss
of
th e p r e s e n c e o f CETA, e f f e c t i v e l y d i v e r t i n g fu n d s
t h a t w o u ld h a v e b e e n u s e d f o r t h i s p u rp o s e
to
o th e r
en d eav o rs.
In
a ll,
th e
tra c k
reco rd
of
PSE p ro g ra m s i n a c h ie v in g t h e i r
p u rp o rte d
o b je c tiv e
—
to
enhance
th e
e m p lo y a b ility
of
p a rtic ip a n ts
fo r
th e
8 o u t o f 10 jo b s c r e a te d b y th e p r i v a t e
s e c to r — h a s b e e n d ism a l in d e e d .
By c o n tr a s t,
sk ill
tra in in g ,
e sp e c ia lly
o n -th e -jo b
tra in in g
a p p e a rs to le a d to h ig h e r p o « t-p ro g ra m in c re a s e s in e a rn in g s th a n




4-26

p u b lic
s e rv ic e
e m p lo y m e n t.
The c u r r e n t tr a in in g p ro g ram s h av e
p ro v e n to b e m o re e f f e c t i v e th a n
th e
PSE
p ro g ram s
at
p la c in g
p a rtic ip a n ts.
(O n ly
about
1 /3
of
PSE
p a rtic ip a n ts
fin d
em p lo y m e n t w hen th e y le a v e t h e i r s u b s i d i z e d j o b . )
M o reo v er,
th e
a v e ra g e c o s t o f g e t t i n g an u n e m p lo y ed p e rs o n i n t o an u n s u b s id iz e d
jo b
fro m
th e
PSE p ro g r a m s i s tw o t o t h r e e t i m e s m o re e x p e n s i v e
th a n u n d er th e tr a in in g p ro g ram s.
As a re s u lt of th is p h ase-o u t o f
PSE
under
CETA,
th e
3 0 0 ,0 0 0
in d iv id u a ls
w ho
c u rre n tly
h o ld
jo b s
c o m p le te ly
or p a rtia lly
f u n d e d w i t h CETA r e s o u r c e s w i l l c o n t i n u e i n
th e ir
jo b s
and
be
ab so rb ed
in to
th e re g u la r S ta te o r lo c a l g ov ernm ent p a y ro ll, be
p la c e d in an u n s u b s id iz e d jo b in th e p r i v a t e s e c t o r b y th e
p rim e
spo n so r,
or
have
t o s e e k e m p lo y m e n t e l s e w h e r e .
T h o se w ho lo s e
t h e i r jo b s w i l l b e e l i g i b l e f o r u n e m p lo y m e n t c o m p e n s a tio n .
The P re sid e n t w ill d ire c t th e S e c re ta ry o f L abor to p la c e a to ta l
fre e z e on h irin g
in
b o th
PSE
p ro g ram s.
The
S e c re ta ry
w ill
d e v e lo p
p la n s
fo r
th e
o rd e rly
phase
dow n o f th e p ro g ram s to
e n s u r e t h a t i n d iv id u a ls h o ld in g C E T A -fun d ed jo b s
are
no
lo n g e r
p a id
w ith
F ed eral
reso u rces
a fte r
S e p te m b e r 3 0 ,
1981.
A
re sc issio n o f unneeded T itle
VI
fu n d s
w ill
be
re q u e ste d
and
excess
T itle II-D re so u rc e s w ill be d e fe rre d in to 1982, re d u c in g
th e
am ount o f
budget
a u th o rity
needed
fo r
c o n tin u in g
CETA
p ro g ram s.
A 1982
budget
am endm ent w ill
be
p ro p o sed to th e
C o n g re ss to re d u c e th e p e n d in g A d m in is tra tio n r e q u e s t.
The p ro p o sa l is
fu n d in g fo r th e

e x p e c te d to
PSE p o r ti o n

r e s u lt in
o f CETA:

changes

in

1986

..

2 ,9 2 4

3 ,9 5 5
3 ,7 7 1

4 ,2 3 6
4 ,0 7 8

4 ,5 7 8
4 ,4 0 8

4 ,9 4 6
4 ,7 6 2

5 ,3 4 1
5 ,1 4 3

-1 5 3
-6 3 5

..

P o lic y re d u c tio n :
B udget a u th o rity .
P ro p o se d b u d g e t:
B udget a u th o rity .

fo llo w in g

(in m illio n s o f d o lla rs )
1984
1983
1982
1985

1981
C u rren t b ase:
B udget a u th o rity .

th e

—4 , 6 4 4
-3 ,5 6 6

-4 ,2 3 6
-4 ,0 7 3

-4 ,5 7 8
-4 ,4 0 8

-4 ,9 4 6
-4 ,7 6 2

-5 ,3 4 1
-5 ,1 4 3

-6 8 9
206

5

2 ,7 7 1 *

--------

--------

--------

*
In c lu d e s $689 m illio n ex c ess T itle II-D
fu n d s
d eferred
in to 1982 and u sed to re d u ce b u d g et a u th o rity n eed s o f c o n tin u in g
CETA p r o g r a m s .




4-27

Department of T r a n s p o r t a t i o n

PH A S E O U T O F F E D E R A L MASS T R A N S IT O P E R A T IN G S U B S I D I E S

M ass t r a n s i t o p e r a t i n g s u b s i d i e s w i l l b e p h a s e d o u t b y 1 9 8 5 .
The
F ed eral
g o v ernm ent
does
n o t,
and
sh o u ld
n o t#
c o n tro l
th e
o p e ra tio n
of
lo c a l
tra n sit
sy ste m s
— in c lu d in g th e i r c o s ts ,
se rv ic e le v e ls and fa re s .
U n fo rtu n a te ly , F e d e ra l
su b sid ie s
fo r
lo c a l
o p e ra tin g
c o s ts can be c o u n te r-p ro d u c tiv e b e c a u se F e d e ra l
" s tr in g s " d r iv e up th e s e c o s ts w h ile h o ld in g f a r e s
u n n e c e ssa rily
lo w .
A ls o , th e r e i s no re a s o n fo r som eone in S io u x F a l l s t o p a y
F e d e r a l ta x e s s o t h a t som eone in L os A n g e le s c a n g e t t o
w ork
on
tim e b y p u b li c t r a n s p o r t a t i o n .
—

F ed eral
fu n d s
o fte n
su p p o rt
m a rg in a lly
e ffe c tiv e
c o n v e n tio n a l tr a n s i t s e rv ic e s and p re v e n t tr a n s p o r ta tio n
needs
fro m
b e in g
serv ed
by
m o re
c o s t-e ffe c tiv e and
in n o v a tiv e
a lte rn a tiv e s
such
as
c a rp o o ls,
v a n p o o ls,
su b sc rip tio n
bus
and
jitn e y
se rv ic e s.
C o n v e n tio n a l
tra n sit
sy ste m s
on
th e
av erag e
have
to
su b sid iz e
slig h tly
m o r e t h a n 50% o f t h e c o s t o f e a c h r i d e t h r o u g h
th e lo c a l, s ta te
and
F ed eral
ta x p a y e r.
F u rth e rm o re ,
th is
n a tio n a l
tra n sit
d e fic it
is e sc a la tin g ra p id ly ;
c o s t i n c r e a s e s f r o m 1 9 7 3 t o 1 9 7 8 a v e r a g e d 1 3 .2 %
a
year
w h ile
th e
a v e r a g e f a r e i n c r e a s e d o n l y 3 .5 % a y e a r o v e r
th e sam e p e r io d .

—

F a re s h av e g e n e ra lly n o t k e p t p ace w ith i n f l a ti o n
sin c e
th e
1973
o i l e m b arg o , e v e n th o u g h th e c o s t o f t h e m a in
a lte rn a tiv e
m eans
of
tra n sp o rta tio n
—
th e
p riv a te
v e h ic le
—
h as in c re a se d d ra m a tic a lly o v er th e r i s e in
in fla tio n .
I t is p ro b a b le th a t th e c o s t o f
o w n in g
and
o p e ra tin g
o n e 's
car w ill
c o n tin u e to in c r e a s e f a s t e r
th a n th e in f la tio n ra te ; th u s, tr a n s it
fares
c o u ld
be
ra ise d
c o n sid e ra b ly
to
co v er th e
lo ss
of
F ed eral
s u b s id ie s w ith o u t lo s in g m any p a tr o n s .

—

T ra n s it o p e ra tin g su b sid ie s fo r
ev ery o n e
—
poor
a lik e
— a r e a t e r r i b l y i n e f f i c i e n t w ay
p a r t ic u la r d isa d v a n ta g e d g ro u p s su ch a s th e e ld
p o o r, m in o ritie s , and
y o u th .
O ne a n a ly s is
th a t
o n ly
2 3 .5 % o f t r a n s i t o p e r a t i n g s u b s i d i e
w e n t t o lo w in c o m e h o u s e h o ld s .

ric h
and
to a s s is t
e r ly , th e
e stim a te d
s in 1975

To c u s h io n th e te m p o ra ry d i f f i c u l t i e s c a u se d b y th is p h a s e o u t o f
F ed eral
a ssista n c e ,
th e
re m a in in g
tra n sitio n
fu n d s
w ill
be
c o n c e n tra te d
on
th o se
la rg e
u rb an a re a s th a t p ro v id e th e m ost
tr a n s it s e rv ic e .
A s th e F e d e r a l G o v ern m en t g r a d u a lly re d u c e s s u b s id ie s f o r t r a n s i t
o p e ra tin g ex p en se s.
S ta te
and
lo c a l
g o v e rn m e n ts
and
tra n sit
o p e ra to rs
w ill
f a c e d e c is i o n s o n W h e th e r t o (1 ) r a i s e S t a t e a n d
lo c a l
su b sid ie s,
(2 ) in c r e a s e
tra n sit
fares,
or
(3 ) re d u c e




4-28

s e rv ic e s.
M any d i f f e r e n t c o m b in a tio n s o f t h e s e a c t i o n s
ta k e n , each u rb an a re a d e c id in g w hat is
best
in
lig h t
lo c a l needs and p re fe re n c e s.

1981
C u rren t b ase:
B udget a u th o rity ....
O u t l a y s ..............................................
P o lic y re d u c tio n :
B udget a u th o rity ....
O u t l a y s ..............................................
P ro p o se d b u d g e t:
B udget a u th o rity ....
O u t l a y s ..............................................




(in m illio n s
1983
1982

w ill be
of
its

o f d o lla rs)
1984
1985

1986

1 ,1 0 5
750

1 ,2 0 8
876

1 ,3 1 6
1 ,0 5 3

1 ,4 2 4
1 ,1 6 8

1 ,5 2 8
1 ,2 8 4

1 ,6 2 6
1 ,3 9 8

-------------

-1 0 3
-9 6

-5 8 1
-2 5 6

-1 ,0 5 9
-6 0 0

-1 ,5 2 8
-1 ,0 8 3

1 ,6 2 6
1 ,3 5 6

1 ,1 0 5
750

1 ,1 0 5
780

735
797

365
568

4-29

-------201

42

Department of Transportation

R E D U C T I O N IN A M T R A K F A R E S U B S I D I E S

P a s s e n g e r s a r e c u r r e n t l y p a y i n g o n l y 40% o f A m t r a k 's
o p e ra tin g
c o s ts.
T ax p ay ers
s u b s i d i z e e a c h p a s s e n g e r 's f a r e a n a v e r a g e o f
§35 p e r t r i p .
T h e se s u b s id iz e d f a r e s a ls o c o m p e te w ith
a ir
and
in te rc ity
bus fa re s.
T a x p a y e r s u b s i d i e s a llo w A m tra k t o o f f e r a
f a r e b e tw e e n C h ic a g o a n d L os A n g e le s t h a t i s 5130
le ss
th a n
an
a irlin e
tic k e t
t o th e sam e d e s tin a t io n .
I t is o b v io u s ly a p o o r
u s e o f s c a r c e ta x d o l l a r s to o p e r a te a t r a i n b e tw e e n
W a sh in g to n ,
D .C . a n d C i n c i n n a t i t h a t , b e c a u s e o f lo w r i d e r s h i p , c o s t s m o re i n
su b sid ie s
th a n
an
a irlin e
tic k e t
fo r
th e
sam e
trip .
The
A d m i n i s t r a t i o n p r o p o s e s t o i n c r e a s e A m tra k f a r e s
to
cover
50% ,
60% ,
70%
and
80%
of
o p e ra tin g c o s ts in 1982, 1983, 1984, and
1985.
F ares w ill be in c re a se d b ecau se i t is n o t f a ir
fo r
th e
g en eral
ta x p a y e r
to s u b s id iz e t h a t p o r tio n o f th e p o p u la tio n w h ic h r i d e s
A m tra k t r a i n s ,
p a rtic u la rly
w h en m any A m tra k
ro u te s
p ro v id e
a lm o st
no n a tio n a l b e n e f it b ec au se th e y o p e ra te t o t a l l y w ith in a
s t a t e o r. j u s t b e tw e e n tw o
sta te s.
It
is
e x p e c te d
th a t
som e
p assen g ers w ill s h ift to a ir or in te rc ity bus tra n sp o rta tio n as a
r e s u lt o f h ig h e r tr a in fa re s .
F ed eral
b u d g e t sa v in g s w ill b e s u b s ta n tia l? §431 m illio n in 1982
an d i n c r e a s i n g t o § 1 .1 b i l l i o n in 1 9 8 6 .
F ares w ill a p p ro x im a te ly
d o u b le on s h o rt d is ta n c e tr a in s
in c re a se
a p p ro x im a te ly
50%
on
lo n g -h a u l
tr a in s , and r i s e s lig h tly on N o rth e a st C o rrid o r ro u te s
s ta rtin g n ex t y ear.
The fin a n c ia l burden w ill
be
s h ifte d
to
A m tra k
p assen g ers
or
S ta te g o v e rn m e n ts, o r e ls e c e r t a i n t r a i n s
w ill b e e lim in a te d .
To a c h ie v e t h is p o lic y ch an g e, th e
A d m in istra tio n
w ill
p ro p o se
a m e n d m e n ts t o t h e 198 2 b u d g e t t o r e d u c e a p p r o p r i a t i o n s f o r A m tra k
su b sid ie s.
L e g isla tio n
w ill a ls o be p ro p o sed to re q u ire h ig h e r
fa re s , g re a te r S ta te fin a n c ia l p a rtic ip a tio n
to
su p p o rt
lo c a l
tra in
se rv ic e ,
a n d e l i m i n a t i o n o f A m tr a k 's f a r e s u b s i d y w h e n i t
c o m p e te s w ith
lo c a l
c o m m u te r t r a i n s .
B e c a u s e A m tra k
tra in s
rep resen t
le ss
th a n
1% o f i n t e r c i t y t r a v e l , t h i s p r o p o s a l w i l l
h a v e v i r t u a l l y no n e g a tiv e e f f e c t s o n p e r s o n a l t r a v e l in t h e U .S .




4— 30

1 981
C u r r e n t base:

B udget a u th o rity . .. .

P o lic y re d u c tio n :
B udget a u th o rity ....
O u t l a y s ..............................................
P ro p o se d b u d g e t:
B udget a u th o rity .. . .
O u t l a y s ..............................................




(in m i l l i o n s o f d o l l a r s )
1585
1953
1984
1985

1986

906
769

1 ,0 4 4
994

1 ,1 3 8
1 ,1 0 0

1 ,2 3 1
1 ,2 0 0

1 ,3 2 1
1 ,3 0 0

1 ,4 0 6
1 ,4 0 0

-2 5
-2 5

-4 3 1
-3 2 5

-6 0 6
-4 8 5

-7 6 0
-6 8 8

-9 6 4
-9 0 4

-1 ,0 5 6
-1 ,0 5 0

881
744

613
669

532
615

471
512

357
396

350
350

4-31

Department of Transportation

R E D U C E D F U N D I N G F O R T H E N O R T H E A S T C O R R I D O R IM P R O V E M E N T P R O J E C T

In a n e f f o r t t o re d u c e fu n d in g p ro g ra m s w h ic h a r e
not
c ritic a l,
e sp e c ia lly
w hen
v ie w e d in th e c o n te x t o f th e N a t i o n 's im m e d ia te
e c o n o m ic
c risis,
th e
N o rth e a st C o rrid o r
Im p ro v em en t
P ro je c t
(N E C IP )
w ill
be
re d ire c te d
and red u ced in s iz e .
The p ro je c t,
w h ic h i s t o im p r o v e r a i l r o a d s e r v i c e b e tw e e n W a s h in g to n D .C .
and
B o sto n ,
p la c e s
n e e d le ss
e m p h a sis
on im p ro v in g t r i p tim e :
th e
c o s ts o f in c r e a s in g t r a i n s p e e d o u tw e ig h th e b e n e f i t s .
S e v e n ty -fiv e p e rc e n t o f
C o rrid o r
rid e rs
are
c o m m u te rs.
They
w o u ld
not
re a p n o tic e a b le b e n e f i ts fro m in c r e a s e d sp e e d b e c a u s e
th e y t r a v e l s h o r t d is ta n c e s on t r a i n s t h a t m ake
freq u en t
sto p s.
Y e t N E C IP h a s p l a n n e d t o s p e n d s i z e a b l e a m o u n ts o f m o n e y f o r h i g h
speed
ra il
s e r v i c e , w h ic h w o u ld r e q u i r e a new s i g n a l l i n g s y s te m
c o s tin g in e x c e ss o f $350 m illio n , e le c tr if ic a tio n
of
re m a in in g
u n e le c trifie d
p o rtio n s o f th e C o rrid o r, and fre q u e n t re s u rfa c in g
o f tra c k and ro ad b ed .
E ven now N o r th e a s t
C o rrid o r
rid e rs
o n ly
pay
about h a lf
o f th e to t a l c o s t o f ru n n in g N o rth e a s t C o rrid o r
tra in s.
I t is u n lik e ly th a t th e y w ill ch o o se to
pay
th e
fares
n e c e ss a ry to c o v e r th e c o s ts o f m a in ta in in g h ig h sp e ed tr a c k .
By r e d ir e c tin g th e u se o f i t s re s o u rc e s ,
m o re
re lia b le
s e rv ic e fo r th e m a jo rity
o f N o rth e a st C o rrid o r tr a v e le r s , and e lim
c a p ita l an d m a in te n a n c e c o s ts w h ile
h o ld
C o rrid o r fa re s .

N E C IP
ra th e
in a te
in g

can p ro v id e s a f e r ,
r th a n th e m in o rity
la rg e , u n n ecessary
dow n
in c re a se s
in

As a
r e s u l t o f t h i s c h a n g e , im p ro v e m e n t w o rk w i l l b e r e d i r e c t e d
to w a rd th e
m ost h e a v ily
tra v e le d
se g m e n ts
of
th e
C o rrid o r,
e le c trific a tio n
w ill
be
e lim in a te d
n o rth
o f N ew H a v e n , t h e
e x is ti n g s i g n a l l i n g sy ste m w il l b e r e p a ir e d r a t h e r th a n r e p la c e d ,
a n d s t a t i o n im p ro v e m e n ts w i l l b e m ade
on
a
F e d e ra l/lo c a l
co st
sh a rin g
b a sis.
By re fo c u sin g
th e
P ro je c t,
sa v in g s
o f $310
m illio n w ill be re a liz e d o v er th e n ex t 4 y e a rs, and re q u e sts
fo r
fu rth e r
fu n d in g
fo r
h ig h sp eed N o rth e a s t C o rrid o r r a i l s e r v ic e
w ill b e a v e rte d .
A u th o riz in g le g is la tio n w ill b e su b m itte d to C o n g ress
to
change
th e fo c u s an d s iz e o f th e N o r th e a s t C o r rid o r Im p ro v em en t P r o je c t.
R e lia b le
a n d s a f e r a i l s e r v i c e w o u ld r e p l a c e f a s t e r t r a i n s p e e d s
as th e g o a l o f th e P ro je c t, and to ta l
a u th o riz a tio n
w o u ld
fa ll
fro m
$ 2 .5
b i l l i o n t o $ 2 .1 9 b i l l i o n .
A b u d g e t am endm ent w ill b e
s u b m i t t e d t o r e d u c e N E C IP 1 9 8 2 f u n d i n g b y $ 2 8 8 m i l l i o n , a n d
$125
m illio n
of
1981
fu n d in g
w ill
be
d eferred
u n til 1982 as th e
P ro je c t is re s tru c tu re d .




4-32

1 9 81
C u r r e n t base:

B udget a u th o r ity ... .
O u t l a y s ..............................................
P o lic y re d u c tio n :
B udget a u th o rity ....
O u t l a y s ..............................................
P ro p o se d b u d g e t:
B udget a u th o rity ....
O u t l a y s ..............................................




(in m i l l i o n s o f d o l l a r s )
1982
1983
1984
1985

350
373

488
465

172
534

20
316

15
152

-------2 5

-2 8 8
-9 5

13
-1 1 4

-2 0
-5 1

-1 5
-2 5

350
348

200
370

185
420

-------265

------127

4-33

1 9 86

Department of Transportation

E L IM IN A T IO N OF FED ERA L SU PPO RT
F O R LOW VOLUM E R A IL R O A D B R A N C H L IN E S

To r e tu r n p ro g ram s to S ta te s and l o c a l i t i e s w hen th e b e n e f its a r e
p rim a rily lo c a l, th e A d m in istra tio n p ro p o se s to e lim in a te fu n d in g
fo r th e L o cal R a il S e rv ic e
A ssista n c e
p ro g ram
of
th e
F ed eral
R a ilro a d A d m in is tra tio n , s ta r tin g in 1981.
T h is p ro g ra m p ro v id e s fo rm u la g r a n t a s s is ta n c e to S ta te s f o r r a i l
p la n n in g
and
fo r
su p p o rt
of
se rv ic e
on
lo w
v o lu m e
ra il
b ra n c h lin e s (u su a lly
d e fin e d
as
lin e s
c a rry in g
le ss
th a n
3
m illio n
g ro ss
to n
m ile s
of
tra ffic
a n n u a lly ).
P ro g ram
te rm in a tio n is p ro p o sed b e c a u se :
(1 ) t r a f f i c on th e s e
lin e s
is
so
l i g h t t h a t i n t e r s t a t e co m m erce w i l l n o t b e d i s r u p t e d ; (2 ) th e
G o v ern m en t h a s l i t t l e i n t e r e s t in th e r e te n tio n o f m a rg in a l
ra il
lin e s;
a n d ( 3 ) o v e r 25% o f p r o g r a m f u n d s a r e a l l o c a t e d t o S t a t e s
th a t h av e l i t t l e o r no b ra n c h lin e ab and on m en t p ro b le m .
A lth o u g h s e v e r a l o th e r F e d e r a l r a i l r o a d a s s i s t a n c e p ro g ra m s s e r v e
a u se fu l p urpo se by
e n c o u ra g in g
ra ilro a d s
to
re stru c tu re
and
im p ro v e
th e ir
ra il
sy ste m s,
th is
p ro g ram
is o f q u e stio n a b le
u se fu ln e ss .
T h ere w ill be l i t t l e ,
if
any,
n o tic e a b le
ad v erse
c o n se q u e n c e fro m i t s te rm in a tio n .
P ro g ram
te rm in a tio n w ill b e a c h ie v e d by re q u e s tin g r e s c is s io n o f
u n c o m m ite d 1 98 1 a p p r o p r i a t i o n s a n d b y n o t r e q u e s ti n g a n y
fu rth e r
a p p ro p ria tio n s fo r 1982 o r su b seq u en t y e a rs.

1981
C u rren t b ase :
B udget a u th o rity ....
P o lic y re d u c tio n :
B udget a u th o rity ....
O u t l a y s ..............................................
P ro p o sed b u d g e t:
B udget a u th o rity ....




(in m illio n s
1982
1983

o f d o lla rs)
1984
1985

1986

80
56

88
80

96
115

104
110

112
115

119
116

-8 0
-8

-8 8
-3 2

-9 6
-6 2

-1 0 4
-8 0

-1 1 2
-1 0 3

-1 1 9
-1 1 0

-------48

— _
48

53

30

12

6

4-34

Department of Transportation

ELIMINATION OF THE COOPERATIVE AUTOMOTIVE RESEARCH PROGRAM

T he A d m in is tra tio n h a s d e c id e d n o t to
in itia te
th e
c o o p e ra tiv e
a u to m o tiv e
research
p ro g ram
(C A R P )
of
th e
D e p a rtm e n t
of
T ra n sp o ra tio n .
Im m e d ia te fu n d in g
e lim in a tio n
is
p ro p o sed
fo r
th is
p ro g ram .
T he a u to m o b ile c o m p a n ie s r a t h e r th a n th e F e d e r a l
G o v ern m en t a r e in th e
best
p o s itio n
to
d e c id e
w h at k in d
of
research
to u n d e rta k e and w hen to do so .
G iv e n o t h e r d em an d s on
i t s re s o u rc e s , F e d e ra l fin a n c in g o f lo n g -te rm re s e a rc h to b e n e fit
a p a r tic u la r in d u s try is an in a p p ro p ria te a llo c a tio n
of
F ed eral
fu n d s.
T h is
p ro g ram
w as
d e v e lo p e d
in
c o o p e ra tio n
w ith
th e
U .S .
a u to m o b ile i n d u s t r y to re d u c e th e N a t i o n 's d e p e n d e n c e on
fo re ig n
o il
by
f i n a n c in g a b a s ic r e s e a r c h p ro g ra m a im e d a t a c c e l e r a t i n g
th e
d e v e lo p m e n t
of
m o re
fu e l-e ffic ie n t
and
te c h n o lo g ic a lly
ad v an ced a u to m o b ile s.
F u n d in g w as o r i g i n a l l y in te n d e d t o b e on a
m a tc h in g
b a sis,
w ith
th e F e d e r a l G o v ern m en t p r o v id in g h a l f th e
reso u rces.
T he m a tc h in g a rra n g e m e n t w as w a iv e d
in
fisc a l
year
1981
because
o f i n d u s t r y e c o n o m ic c o n d i t i o n s .
As a r e s u lt, th e
p ro g ra m in 1981 is now w h o lly a F e d e ra l f in a n c ia l r e s p o n s ib ili ty .
A r e s c i s s i o n o f u n c o m m itte d 1981 a p p r o p r ia t io n s w i l l b e
and no re q u est w ill
be
m ade
fo r
a p p ro p ria tio n s
fo r
subsequent y ears.

1981
C u rren t b ase:
B udget a u th o rity
O u t l a y s ...............................
P o lic y re d u c tio n :
B udget a u th o rity
O u t l a y s ...............................
P ro p o se d b u d g e t:
B udget a u th o rity
O u t l a y s ...............................




(in m illio n
1982
1983

re q u e ste d
1982
or

of d o lla rs)
1984
1985

1986

12
6

13
9

14
13

15
14

16
14

17
15

12
-6

-1 3
-9

-1 4
-1 3

-1 5
-1 4

-1 6
-1 4

-1 7
-1 5

4-35

Department o f th e I n t e r i o r

A C C E L E R A T IO N O F M IN E R A L L E A S IN G

T he m o re p r o m is in g
areas
of
th e
N a tio n
fo r
u n d isc o v e re d
u n d e v e lo p e d
en erg y
and
m in e ra l re s o u rc e s
are
la rg e ly on
F e d e ra l la n d s .
The P re s id e n t b e lie v e s th a t th o se la n d s
can
sh o u ld
b e th o ro u g h ly e x p lo re d an d , as a p p ro p ria te , d e v e lo p e d
m in e ra ls p ro d u c tio n ,
w h ile
at
th e
sam e
tim e
p ro te c tin g
e n v iro n m e n t.

or
th e
and
fo r
th e

The
P re sid e n t
p la n s
to
a c c e le ra te
th e
le a sin g
o f m in e ra l
reso u rces on F ed eral
la n d s.
The p ro p o sed
a c tio n s
w ill
m ake
a d d itio n a l
la n d s
a v a ila b le
fo r m in e ra l
e x p lo ra tio n
and
fo r
m in e r a l d e v e lo p m e n t an d p ro d u c tio n .
T he m a jo r e m p h a sis
is
upon
le a s in g la n d s fo r e n e rg y m in e ra ls .
The
a c c e le ra tio n
of
le a sin g
sought by
th e
P re sid e n t
w ill
s ig n ific a n tly in c re a se
o u r k n o w le d g e
of
d o m e stic
en erg y
and
n o n -en erg y
m in e ra l
reso u rces.
D o m e stic
p ro d u c tio n
w ill
be
s i g n i f i c a n tl y in c re a s e d in th e lo n g e r te rm , th u s c o n tr ib u tin g
to
e c o n o m ic
g ro w th .
The a c c e le ra tio n w ill in c re a s e th e p ro p r ie ta ry
r e c e ip ts o f th e G o v ern m en t an d h e lp to re d u c e th e b u d g e t d e f i c i t ,
a n d a l s o i n c r e a s e t h e s h a r e d re v e n u e p a y m e n ts t o S t a t e s .
R ig h ts t o o i l and g a s on th e O u te r C o n tin e n ta l
S h e lf
(O C S )
are
le a se d
by
c o m p e titiv e
se a le d -b id
a u c tio n s
c u rre n tly
h e ld in
a c c o rd a n c e w ith th e le a s in g sc h e d u le o f Ju n e 198 0.
A s p a r t o f t h e a c c e l e r a t i o n s o u g h t b y t h e P r e s i d e n t , t h e OCS o i l
and
gas
le a s in g
sc h e d u le
w ill be re v ise d as q u ic k ly as can be
d o n e i n a c c o r d a n c e w it h t h e r e q u ir e m e n ts o f t h e OCS L a n d s A c t .
A
m a jo r o b je c tiv e o f th e r e v is io n
w ill
be
to
s h o rte n
th e
tim e
p e rio d
re q u ire d
t o s t a r t e x p l o r a t o r y d r i l l i n g i n a l l OCS a r e a s .
The
OCS
s a le
p re p a ra tio n
p ro cess
w ill
be
stre a m lin e d
and
s h o rte n e d
w h ile
p re s e rv in g a d e q u a te p ro te c tio n o f e n v iro n m e n ta l
v a lu e s an d th e p u b l i c 's p r o p r ie ta r y i n t e r e s t .
O n -sh o re o i l an d g a s , c o a l, o i l s h a le , g e o th e rm a l re s o u r c e s ,
and
o th e r
m in e ra ls
a r e le a s e d b y a v a r i e t y o f m e th o d s u n d e r s e v e r a l
le g isla tiv e a u th o ritie s .
T he C a r te r b u d g e t a n t i c i p a t e d tw o
coal
le a se
sa le s
in
1982, th re e in 1983, and fo u r in 1984.
I t a lso
p la n n e d to h o ld o n e c o m p e titiv e o i l and g as
le a se
sa le
in
th e
N a tio n a l
P e tro le u m
R e se rv e -A la sk a
d u rin g
1982,
to o ffe r fo u r
p ro to ty p e o i l s h a re le a s e s in 1983, and to
h o ld
th e
firs t
o il
s h a le le a s e s a le u n d er a p erm an en t le a s in g p ro g ram in 1 9 8 5.
O n -sh o re m in e ra l le a s in g w ill be a c c e le ra te d b y :
—

o f f e r i n g i n 1 9 8 2 , tw o o i l a n d g a s
le a se
sa le s
N a tio n a l
P e tro le u m R e s e rv e -A la sk a an d fo llo w in g
a d d itio n a l s a le s in su b se q u en t y ears*




4-36

in
th e
up w ith

—

b e g in n in g re g u la r o i l s h a le
p ro g ram in 1984 o r e a r l ie r ;

—

b e g in n in g im m e d ia te ly to s im p lify
a d m in istra tiv e ly
th e
coal
le a sin g
p ro c e s s to a c h ie v e s ig n if ic a n tly ex panded
le a s in g by 1983, i f p o s s ib le , b u t no la te r th a n 1984.

As a r e s u lt o f th e se chan
gas,
o n-sh ore
o il
and
R e se rv e -A la sk a ,
o il
sha
s u b s ta n tia lly in c re a se d o

le a s in g
and

under

a

p erm an en t

g e s , t h e r a t e o f l e a s i n g o f OCS o i l
and
gas
la n d s
in
th e
N a tio n a l P e tro le u m
le
la n d s ,
and
coal
la n d s
w ill
be
v e r th e y e a rs 1 98 1-19 8 6.

T hese
p o lic y
changes
are
e x p e c te d
to r e s u lt in th e b u d g e ta ry
c h a n g e s show n in th e ta b le
b e lo w .
The
re d u c tio n
show n
b e lo w
in c lu d e s
m odest
in c re a se s
in
a d m in istra tiv e
c o sts.
I t a lso
in c lu d e s a $ 1 0 0 m il lio n in c r e a s e in 1 9 8 2 , an d s m a lle r a m o u n ts
in
fu tu re
y e a r s , i n p a y m e n ts t o t h e S t a t e s fro m M in e ra l L e a s in g A c t
rev en u es.

1981
C u rren t b a s e ....
P o lic y re d u c tio n
P ro p o sed b u d g e t.

B ud g et A u th o rity and O u tla y s
(in m illio n s o f d o lla rs )*
1983
1984
1985
1982

-9 ,2 5 7 -1 0 ,9 0 0 -1 0 ,8 0 0
-2 5 0
-8 0 0
-2 ,0 0 0
-9 ,5 0 7 -1 1 ,7 0 0 -1 2 ,8 0 0

-1 0 ,9 0 0
-3 ,1 0 0
-1 4 ,0 0 0

-1 1 ,0 0 0
-3 ,5 0 0
-1 4 ,5 0 0

1986
-1 1 ,1 0 0
-3 ,5 0 0
-1 4 ,6 0 0

*
E a c h l i n e b e lo w i s th e sum o f
le a s in g -re la te d
e x p e n d itu re s
and
re c e ip ts.
In
each
ca se th e n e t r e s u lt
n e g a tiv e o u tla y
s in c e
th e
in c o m e
to
th e
G o v ern m en t
—
—
is
g re a te r
th a n
t h e g o v e r n m e n t 's e x p e n d i t u r e
re c e ip ts
An in c re a s e in n e g a tiv e o u tla y s re d u c e s o u tla y s and
le a sin g .
d e fic it.




4-37

b u d g e ta ry
is a
th e
s on
th e

Civil Aeronautics Board

ELIMINATION OP A I R L I N E SUBSIDY PROGRAM FOR AIRLINE DEVELOPMENT

The A d m in istra tio n p ro p o se s th e e lim in a tio n o f
th e
406
a irlin e
su b sid y p ro g ram a d m in is te re d by th e C iv il A e ro n a u tic s B o ard .
The
419
a i r l i n e s u b sid y p ro g ram , in te n d e d to e n su re s e rv ic e to lo c a l
c o m m u n itie s a s th e
a irlin e
in d u s try
is
d e re g u la te d ,
w ill
be
a d ju ste d
to
p rev en t
e x c e ssiv e
p ay m en t t o c o m m u n itie s s h i f t i n g
from th e 406 s u b s id y p ro g ra m to th e 419 p ro g ram .
T he 406 p ro g ram w as c r e a te d in 1938 in o rd e r to d e v e lo p
th e
a ir
tra n sp o rta tio n
in d u s t r y in th e U n ite d S ta te s a n d t o im p ro v e m a il
se rv ic e .
S in c e th a t tim e th e a i r l i n e in d u s try
has
m a tu re d
and
becom e
fin a n c ia lly
sound.
The
su b sid y
p ro g ram
s t i l l e x is ts
because o f
th e
lo b b y in g
e ffo rts
of
su b sid iz e d
a irlin e s
and
c e rta in
c o m m u n itie s r e c e iv in g s u b s id iz e d s e r v ic e .
T h ere a r e , in
f a c t , a i r l i n e s now r e c e iv in g g o v e rn m e n t fu n d in g
fo r
s e rv ic e
to
c o m m u n itie s
w h ere
n o n su b sid iz e d a ir lin e s a re w illin g to p ro v id e
s e rv ic e .
The 419 a i r l i n e s u b sid y p ro g ram , c re a te d to g u a ra n te e a i r s e rv ic e
to c o m m u n itie s s e rv e d b y
n o m o re
th a n
one
a irlin e ,
w ill
be
a d ju ste d
s o t h a t n o c o m m u n ity n e w ly e n t e r i n g t h e p ro g ra m w i l l b e
a b le t o r e c e i v e m o re i n 419 s u b s id y th a n i t
had
re c e iv e d
under
th e
o th e r
p ro g ram .
T h is
w ill
p rev en t
su b sid y
to
A la sk a n
c o m m u n itie s fro m s k y - r o c k e tin g .
By d isc o n tin u in g
th is
o b so le te
m illio n w ill b e saved o v er th e n ex
en sure
a i r tr a n s p o r ta tio n se rv ic e
419 p ro g ram w h ile e lim in a tin g e x c e

p ro g ram ,
a p p ro x im a te ly
§210
t 5 y ears.
The g ov ernm ent w ill
to lo c a l c o m m u n itie s u n d e r th e
ssiv e s u b s id ie s .

A u th o riz in g
le g isla tio n
w ill
be
su b m itte d
to
C o n g ress
to
e lim in a te
th e
e x is tin g
406
p ro g ram .
L e g is la tio n w ill a ls o be
s u b m itte d t o am en d t h e 4 19 p ro g ra m t o p r e v e n t a n y c o m m u n ity
fro m
re c e iv in g
g re a te r
su b sid y
th a n
it
had d ire c tly or in d ire c tly
re c e iv e d u n d e r th e 406 p ro g ram .
(in m illio n s o f d o lla rs )
1982
1983
1984
1985

L981
C u rren t b ase:
B udget a u th o rity
O u t l a y s ...............................
P o lic y re d u c tio n :
B udget a u th o rity
O u t l a y s . . ....................
P ro p o sed b u d g e t:
B udget a u th o rity
O u t l a y s ...............................




1986

144
148

144
144

143
143

138
139

123
124

97
99

-------™ —

-5 6
-5 0

-6 4
-6 4

-5 4
-5 4

-3 4
-3 4

-2
-2

88
94

79
79

84
85

89
90

95
97

144
148

4-38

United States

Railway Association

T E R M IN A T IO N O F F U N D IN G FO R C O N R A IL

As p a r t o f a g e n e ra l e f f o r t to red u ce th e p u b lic ta x
b urden
and
a llo w
m a rk e t p r in c ip le s to a p p ly , th e A d m in is tra tio n in te n d s to
w ean C o n ra il fro m a l l F e d e ra l s u b s id ie s .
No fu n d in g w ill b e p ro v id e d to
a id
C o n ra il
beyond
1982.
The
o r i g i n a l i n t e n t o f th e la w l e a d i n g t o C o n r a i l 's f o r m a tio n in 1 97 6
w as
th a t
it
becom e
a s e lf - s u f f ic ie n t c o rp o ra tio n ; th is p o lic y
ch an g e w ill re q u ire C o n ra il to a tta in
th a t
goal
m o re
q u ic k ly .
M a jo r
refo rm
of
C o n ra il,
in c lu d in g
(a) s u b s ta n tia l
tra c k
a b a n d o n m e n t, (b ) r e d u c tio n in C o n r a i l 's w o rk fo rc e an d c h a n g e s
in
w ork
ru le s,
and
(c) S ta te
a n d /o r
lo c a l su p p o rt fo r lo sin g o r
m a r g in a l r a i l l i n e s i s n e c e s s a r y f o r 's e l f - s u s t a i n i n g
o p e ra tio n s.
W ith o u t s u c h re fo rm , d ism e m b e rm e n t o f C o n r a il th r o u g h s a l e o f i t s
l i n e s t o o t h e r r a i l r o a d s m ay b eco m e a n e c e s s i t y .
C o n ra il
p ro v id e s
f r e ig h t* a n d c o m m u te r r a i l s e r v i c e o v e r 1 7 ,0 0 0
ro u te m ile s in th e N o rth e a s te rn q u a d ra n t o f
th e
U n ite d
S ta te s.
I t w as fo u n d ed in 1976 as a co n se q u en ce o f th e f in a n c ia l c o lla p s e
o f
th e
Penn
C e n tra l
and
six
o th e r
N o rth e a ste rn
ra ilro a d s.
O r i g i n a l l y , i t w as e s tim a te d t h a t C o n r a il w o u ld r e q u i r e
a
to ta l
o f
$ 2 .1
b illio n
in
d ire c t
F ed eral
a id
and
$ 0 .2 b i l l i o n in
p a y m e n ts t o
a d v e rse ly
a ffe c te d
ra ilro a d
e m p lo y e e s.
In ste a d ,
F ed eral
p a y m e n ts
m ade fro m 1 9 7 6 -1 9 8 1 to C o n r a il, i t s e m p lo y e e s,
an d i t s p r e d e c e s s o r r a ilr o a d s e x c e e d $ 5 .7 b i l l i o n :
$ 3 .3
b illio n
in d i r e c t a i d , $ 0 .3 b i l l i o n in p a y m e n ts t o C o n r a il e m p lo y e e s, an d
$2-1 b i l l i o n fo r an o u t-o f-c o u rt s e ttle m e n t w ith th e Penn C e n tra l
re g a rd in g th e v a lu e o f p r o p e r tie s tr a n s f e r r e d to C o n ra il in 1976.
A
" s ta tu s
quo"
C o n ra il
w o u ld
co
a d d itio n a l $ 1 .5 -2 .0 b ill io n in d ir e c
w e ll
as
h un dred s
o f m illio n s o f d
e m p lo y e e s an d
in
co u rt
and
ju d g m
o u t s ta n d in g la w s u i t s .

st
th e F e d e r a l G o v ern m en t a n
t a id b e tw e e n
198 1-19 8 5,
as
o l l a r s in p a y m e n ts to C o n r a il
ent
c o sts
as
a
re su lt
of

A lth o u g h
a
$350
m illio n
1981
su p p le m e n ta l
a p p ro p ria tio n
is
re q u e s te d to k eep C o n ra il in ta c t th is y e a r, $100 m illio n o f
th is
a p p ro p ria tio n
w ill
be re se rv e d fo r u se in 1982, c o n tin g e n t upon
a s s u ra n c e s th a t a lo n g -ru n s o lu tio n can b e w orked o u t to
re so lv e
C o n ra il* s
p ro b le m s.
L e g is la tio n w ill b e p ro p o se d a f t e r p e n d in g
s tu d ie s a r e c o m p le te d in A p r il.




4-39

1981
C u r r e n t base:

B udget a u th o r ity ....
O u t l a y s ..............................................
P o lic y ch a n g es:
B udget a u th o rity ....

P ro p o sed b u d g e t:
B udget a u th o rity ....
O u t l a y s ..............................................




(in m i l l i o n s o f d o l l a r s )
19 8 2
1983
1984
1 9 85

1986

185
185

450
450

550
550

300
300

150
150

100
100

+350
+250

-4 0 0
-3 0 0

-5 5 0
-5 5 0

-3 0 0
-3 0 0

-1 5 0
-1 5 0

-1 0 0
-1 0 0

535
435

50
150

-—
-------

-------------

-------------

4-40

---------------

Export-Import

Bank

R E D U C T IO N O F E X P O R T -IM P O R T BANK D IR E C T L E N D IN G

To h e lp
c o n tro l
th e
e x p a n sio n
of
F ed eral
P a rtic u la rly
th o se
w ith
a
su b sid y e le m e n t,
w i l l p r o p o s e t h a t t h e E x p o r t - I m p o r t B a n k 's a u t h
d ire c t
lo a n s
be
s e t a t $ 4 .4 b i l l i o n in 1 98 2,
C a r t e r b u d g e t a n d 31% f r o m t h e c u r r e n t b a s e .

cred
th e A
o rity
dow n

it
p ro g ram s,
d m in istra tio n
to m ake
new
12% f r o m t h e

T he B a n k ' s le n d in g o p e r a tio n s g rew b y
over
400%
fro m
1977
to
1980.
The
C a r te r a d m in is tr a tio n u se d th e B ank a s a v e h ic le fo r
h e a d -to - h e a d c o m p e titio n w ith fo re ig n
ex p o rt
su b sid y
p ro g ram s.
Som e
a r g u e t h a t r a p id f u r t h e r g ro w th in th e E x p o rt-Im p o rt B a n k ’s
d ir e c t lo a n s is n e c e ssa ry to expand e x p o rts,
red u ce
U .S .
tra d e
d e fic its,
a n d h a l t t h e d e c l i n e i n t h e U .S . s h a r e o f w o r ld t r a d e .
H o w ev er, th e in t e r n a t i o n a l a c c o u n ts o f th e U n ite d S ta te s a r e
now
stro n g
co m p ared
to
o th e r m a jo r i n d u s t r i a l c o u n tr ie s .
T h e U .S .
c u r r e n t a c c o u n t b a la n c e h a s im p ro v e d b y n e a r ly $20 b i l l i o n
sin c e
1978
w h ile
th o se
of
G erm any
and
Japan
h av e d e c lin e d by $26
b ill io n an d $30 b illio n re s p e c tiv e ly .
F u r t h e r , t h e U .S . s h a r e o f
w o rld tr a d e h a s in c re a s e d in r e c e n t y e a r s .
T h is
e x c e lle n t
U .S .
ex p o rt
p erfo rm an ce
h a s r e s u lt e d p r im a r ily fro m c y c l i c a l c h a n g e s
in t h e U .S . an d f o r e ig n e c o n o m ie s , a n d n o t
fro m
g ro w th
in
th e
B an k ' s d ir e c t le n d in g .
B ecause
of
th e
B a n k 's
p ast
le n d in g
p o lic ie s,
fa c ilitie s
te n d
to
be
reg ard ed
as
e n title m e n
M o reo v er,
a
la rg e
p ro p o rtio n
of
th e
B a n k 's
an
su p p o rts e x p o rts by a h a n d fu l o f la rg e
firm s.
In
firm s
a c c o u n te d
fo r
t w o —t h i r d s
o f d ir e c t lo a n s .
B a n k 's s u b s i d y t o f o r e i g n b o r r o w e r s r e s u l t s
in
a
r e t u r n t o t h e U .S . eco n o m y a n d a d r a i n o n c a p i t a l t h
e l im in a t e s th e b e n e f i ts fro m t r a d e .

its
c re d it
t
p ro g ram s.
nual
le n d in g
1980,
seven
F u rth e r, th e
lo w
ra te
of
a t red u ces o r

The
A d m i n i s t r a t i o n 's
p ro p o sal w ill
e n a b le
th e
B ank to o f f e r
s u b s t a n t i a l l e v e l s o f c r e d i t t o U .S . e x p o r t e r s ; b u t c r e d i t
te rm s
w i l l b e l e s s g e n e ro u s a n d c r e d i t w i l l b e m o re c a r e f u l l y t a r g e t e d .
In
a d d itio n
to
b e n e fitin g
fro m
th e re g u la r, lo n g -te rm d ir e c t
l o a n s , s m a l l e r U .S .
e x p o rte rs w ill c o n tin u e to
be
a ssiste d
by
th e
B a n k 's m e d iu m -te rm d i s c o u n t lo a n p r o g r a m .
T h is com ponent o f
t h e B a n k 's d i r e c t le n d i n g w i l l
be
m a in ta in e d
a t
$400
m illio n
a n n u a l l y r a t h e r th e m e l i m i n a t e d a s p r o p o s e d b y P r e s i d e n t C a r t e r .
By
r e s t r a i n i n g th e g ro w th o f th e s e p ro g ra m s, F e d e r a l o u tla y s an d
th e F e d e r a l d e f i c i t c a n b e re d u c e d b y m o re th a n $6
b illio n
over
th e
next
5
fisc a l
y ears.
A t th e sam e tim e , th e o b je c tiv e o f
p ro m o tin g e x p o rts w ill b e su p p o rte d a t h i s t o r ic a ll y h ig h
le v e ls .
The
c h a n g e s w i l l h a v e o n ly a n o m in a l im p a c t o n t h e l e v e l o f U .S .
e x p o r ts b e c a u s e (1 ) p re v io u s
c re d it
le v e ls
w ere
u n n e c e ssa rily
h ig h ,
(2 ) th e
d i r e c t l o a n p r o g r a m f i n a n c e s o n l y 2 t o 3% o f U . S .
e x p o r ts , an d (3 ) a s in f l a t i o n an d
in te re st
ra te s
su b sid e ,
th e
d e m a n d f o r t h e B a n k 's c r e d i t w i l l f a l l .




, 4-41

T h e E x p o r t - i m p o r t B a n k ' s b u d g e t l e v e l s w i l l c h a n g e as

1981
C u rren t b ase:
Loan a u th o riz a tio n s .
B udget a u th o rity ....
P o lic y re d u c tio n :
Loan a u th o riz a tio n s .
B udget a u th o rity ....
P ro p o sed b u d g e t:
Loan a u th o riz a tio n s .
B udget a u th o rity ....




5 ,9 0 0
7 ,0 1 0
2 ,3 4 0
-7 5 2
-7 5 0
-6 0
5 ,1 4 8
6 ,2 6 0
2 ,2 8 0

(in m illio n s
1983
1982

follows:

o f d o lla rs)
1984
1985

1986

7 ,3 1 0
6 ,0 5 0
2 ,7 7 0

7 ,7 1 0
6 ,3 9 0
2 ,9 6 0

8 ,1 0 0
6 ,6 9 0
3 ,1 9 0

-2 ,0 1 0 -2 ,0 9 0 -2 ,3 5 0
-1 ,9 8 0 -2 ,1 1 0 -2 ,2 5 0
-4 1 0
-9 9 0 -1 ,3 8 0

-2 ,5 0 0
-2 ,4 1 0
-1 ,6 0 0

-2 ,6 5 0
-2 ,5 6 0
-1 ,7 1 0

5 ,2 1 0
3 ,9 8 0
1 ,3 6 0

5 ,4 5 0
4 ,1 3 0
1 ,4 8 0

6 ,4 1 0
5 ,9 3 0
2 ,7 8 0

4 ,4 0 0
3 ,9 5 0
2 ,3 7 0

4-42

6 ,8 8 0
5 ,7 0 0
3 ,0 4 0

4 ,6 9 0
3 ,5 9 0
2 ,0 5 0

4 ,9 6 0
3 ,8 0 0
1 ,3 9 0

Postal

Service

R E D U C T IO N O F P U B L IC S E R V IC E AND REV EN U E FO RG O N E S U B S I D I E S
TO TH E PO ST A L S E R V IC E

T he A d m in is tra tio n b e lie v e s th a t th e c o s ts o f m a il s e r v ic e sh o u ld
be b o rn e by
u sers,
not
ta x p a y e rs.
The
U .S .
P o s ta l
S e rv ic e
c u rre n tly
re c e iv e s
a
F e d e r a l s u b s i d y e q u i v a l e n t t o a b o u t 7% o f
its to ta l
o p e ra tin g
b u d g e t.
The
F ed eral
paym ent
su b sid iz e s
c e rta in
m a il
u sers
and
in c re a s e s th e f in a n c ia l b u rd e n fo r a l l
ta x p a y e rs.
T h is
p r o p o s a l w o u ld
red u ce
th a t
b urden
by
$632
m illio n in 1982.
T h ese s u b s id ie s u n d e rc u t th e in c e n tiv e s fo r th e P o s ta l S e rv ic e to
re a liz e
o p e ra tio n a l
e f f i c i e n c i e s , . slo w in g
th e p r o g r e s s to w a rd
f u l l f in a n c ia l in d e p e n d e n c e .
A r t i f i c i a l l y s u p p re s se d m a il
ra te s
fo r
c e rta in
u sers,
m ade p o s s ib le b y th e s e s u b s i d i e s , e n c o u ra g e
i n e f f i c i e n t u se o f th e m a il sy ste m .
T h is p ro p o se d re d
and
th e
rev en u e
p u b lic se rv ic e su
th a t
are
not
s
p ro v id e s fu n d s fo
m a il.
U nder
th is
out by 1984,
$789 m illio n

u c t i o n w o u ld a f f e c t t h e p u b l i c
se rv ic e
su b sid y
fo rg o n e
p a y m e n ts
to th e P o s ta l S e rv ic e .
The
b sid y o f fs e ts th e c o s ts o f m a in ta in in g
s e rv ic e s
e lf-su sta in in g .
The
rev en u e
fo rg o n e
su b sid y
r fre e and red u ced ra te s fo r c e rta in c la s s e s
of

p ro p o sa l,
th e p u b lic s e rv ic e su b sid y w ill be p h ased
an d th e re v e n u e fo rg o n e p ay m en t w i l l b e re d u c e d fro m
to $500 m illio n .

1981
C u rren t base:
B udget a u th o rity ....
O u tla y s.• • • • • • • » • • • •
P o lic y re d u c tio n :
B udget a u th o rity ...•
O u t l a y s ..............................................
P ro p o se d b u d g e t:
B udget a u th o rity ....
O u t l a y s ..............................................




(in m illio n s
1983
1982

o f d o lla rs)
1984
1985

1986

1 ,5 9 3
1 f593

1 .5 0 1
1 .5 0 1

1 .4 0 9
1 .4 0 9

1 .3 1 7
1 .3 1 7

1 .3 1 7
1 .3 1 7

1 .3 1 7
1 .3 1 7

-2 5 0
-2 5 0

-6 3 2
-6 3 2

-6 9 0
-6 9 0

-76 5
-7 6 5

-7 7 9
-7 7 9

-7 7 9
-7 7 9

1 ,3 4 3
1 ,3 4 3

869
869

719
719

552
552

538
538

538
538

4-43




5.

S T R E T C H O U T AND R E T A R G E T P U B L IC S E C T O R
C A P I T A L IM P R O V E M E N T PR O G R A M S

D e p a rtm e n t o f T r a n s p o r ta tio n

R E D U C T I O N O P F E D E R A L H IG H W A Y C O N S T R U C T I O N G R A N T S

T h e A d m i n i s t r a t io n w i l l p ro p o s e h ig h w a y l e g i s l a t i o n t o
e sta b lis h
p ro g ram
stru c tu re
and
fu n d in g
fo r
th e n ex t 5 y e a rs.
As w ith
o th e r
m a jo r
fe d e ra lly
su p p o rte d
p u b lic
se c to r
in v e stm e n t
p ro g ram s,
th e
A d m i n i s t r a t i o n 's
h ig h w a y
p ro g ram
p ro p o sal w ill
in v o lv e s t r e tc h i n g o u t an d slo w in g
dow n
c o n stru c tio n
of
lo w e r
p rio rity
h ig h w a y p r o j e c t s .
T h is a c t i o n i s r e q u ir e d to h e l p s te m
t h e n e a r - t e r m i n s t a b i l i t y a n d d e t e r i o r a t i o n o f th e U .S .
econom y.
In a d d i t i o n , th e A d m in is tr a tio n w i l l p ro p o s e to e lim in a te m any o f
th e
e x istin g
sp e c ia l
c a te g o ric a l
p ro g ram s, a llo w in g S ta te and
lo c a l g o v e rn m e n ts to s e t
th e ir
own p r i o r i t i e s
and
to
assum e
re sp o n sib ility
fo r
h ig h w a y
p ro g ram s n o t d ir e c t ly a f f e c tin g th e
F ed eral
p rio ritie s
of
p re se rv in g
in te rs ta te
co m m erce
and
p ro v id in g
fo r th e n a tio n a l d e fe n se .
B o th th e p r im a r y s y s te m an d
th e I n t e r s t a t e h ig h w a y s y s te m
in
p a rtic u la r
w ill
c o n tin u e
to
re c e iv e
a h ig h
le v e l
o f F e d e ra l fu n d in g .
Som e lo w e r p r i o r i t y
I n t e r s t a t e h ig h w a y p r o j e c t s , h o w e v e r, w i l l b e e l im in a te d to a llo w
f i n a l c o m p le tio n o f th e sy ste m b y th e 1990 s t a t u t o r y d e a d lin e .
T h e p r o p o s e d c h a n g e s in th e F e d e r a l h ig h w a y p ro g ra m w i l l
p ro d u ce
budget
sa v in g s
o f a p p ro x im a te ly $ 1 2 .6 b i l l i o n th r o u g h 1 9 8 6 .
At
th e sam e tim e , th e c le a r fo c u s o f F e d e ra l a tte n tio n
and
fu n d in g
on th e h ig h e r p r i o r i t y I n t e r s t a t e an d p rim a ry sy ste m s, a lo n g w ith
g re a te r
re sp o n s ib ility
and f le x ib ility a t th e S ta te le v e l, w ill
e n s u r e t h a t h ig h w a y t r a n s p o r t a t i o n s y s te m s c o n tin u e t o s e r v e
th e
N a t i o n 1s n e e d s .
To
A dm
a u th
a lso

im p le m e n t
th e
A d m i n i s t r a t i o n 's
h ig h w a y
p ro g ram ,
th e
in is tra tio n w ill p ro p o se ch an g es in th e e x is tin g 1982
h ig h w a y
o riz a tio n s.
A u th o riz a tio n le v e ls f o r 1983 th ro u g h 1986 w ill
b e p ro p o sed .




5- 1

(in m i l l i o n s o f d o l l a r s )
1982
19 83
1984
1985

1981
C u r r e n t base:

B udget a u th o rity ....
O u t l a y s ..............................................
P o lic y re d u c tio n :
B udget a u th o r ity ....
P ro p o sed b u d g e t:
B udget a u th o rity ....
O u t l a y s ..............................................




1986

1 1 ,0 5 4
9 ,8 5 4

1 1 ,9 7 9
1 0 ,8 2 8

1 2 ,7 8 9
1 1 ,5 0 3

1 3 ,5 8 6
1 2 ,3 9 5

------- - 1 , 3 9 0 - 1 , 9 6 4
-—
-2 4 4 -1 ,2 1 1

-2 ,5 4 6
-1 ,7 0 0

-3 ,2 4 3
-2 ,0 8 8

-3 ,4 3 7
-2 ,2 3 4

9 ,4 3 3
9 ,1 2 8

9 ,5 4 6
9 ,4 1 5

1 0 ,1 4 9
1 0 ,1 6 1

9 ,2 0 0
8 ,7 3 4

9 ,2 0 0
8 ,7 3 4

9 ,9 2 6
8 ,4 0 1

8 ,5 3 6
8 ,1 5 7

5-2

9 ,0 9 0
8 ,6 4 3

Department of Transportation

R E D U C T IO N IN FE D E R A L M ASS T R A N S IT C A P IT A L G R A N TS

The re v ise d
budget
red u ces
fu n d in g
le v e ls
fo r
m ass
tra n sit
c a p ita l
g ra n ts .
The b ud get
s a v in g s a re p rim a rily a c h ie v e d by
re d u c in g th e am ount o f fu n d s fo r c o n s tru c tin g
new
ra il
tra n sit
s y ste m s
and
e x te n d in g
e x is tin g
sy ste m s.
The
re v ise d budget
c o n tin u e s to re c o g n iz e a F e d e ra l in te r e s t
in
im p ro v in g
tra n s it
se rv ic e s
th ro u g h
g ra n ts
to
p u rc h a se b u se s and u p d a te e x is tin g
r a i l sy ste m s — p a r t ic u la r l y in la r g e , c o n c e n tra te d u rb a n
areas.
The
c o n stru c tio n
of
new r a i l t r a n s i t s y s te m s o r e x te n s io n s h a s
n o t p ro v e d , h o w ev er, to b e
as
c o st-e ffe c tiv e
as
le ss
c a p ita l
in te n s iv e
p ro je c ts.
T he f iv e r a i l sy ste m c o n s tr u c tio n p r o je c ts
now u n d e rw a y t h a t r e c e iv e F e d e r a l a s s i s t a n c e (W a sh in g to n ,
M ia m i,
B u ffa lo ,
B a ltim o re ,
and
A tla n ta )
re q u ire
a p p ro x im a te ly
$75
m illio n a m ile to c o n s tr u c t an d e q u ip fo r
o p e ra tio n .
The
sam e
$75
m illio n
c o u ld
b e u s e d t o b u y m o re th a n 500 b u s e s .
F ed eral
a s s is ta n c e fo r such r a il c o n stru c tio n p ro je c ts w ill be
p o stp o n e d
a t
le a s t
u n til
th e e c o n o m ic s i t u a t i o n a n d th e c o n d i tio n o f th e
F e d e r a l b u d g e t im p ro v e .
T hese changes

are needed because:

—

P rim a ry r e s p o n s ib ili ty fo r m ass
tra n sit
w ith S ta te an d lo c a l g o v e rn m e n ts.

—

In th e
sh o u ld
sy ste m s
p art of

—

The a v a ila b ility o f s te a d ily in c re a sin g F e d e ra l
tra n sit
fu n d in g
and F e d e ra l re g u la to ry re q u ire m e n ts h a s s h a rp ly
e s c a la te d new t r a n s i t s y s te m c o s ts .
F e d e ra lly
fin a n c e d
ra il
s y s te m s a r e o f t e n b u i l t w ith e x tr a v a g a n t f e a tu r e s ';
c o n s t r u c t i o n w ag es p a id a r e s o m e tim e s
e x c e ss iv e ly
h ig h
d u e to F e d e ra l la w s; an d r o u te s a re ad d ed w h ere th e y a re
not
ju stifie d
fro m
an
e c o n o m ic
p o in t
of
v ie w .
In
co m p a riso n to th e $75 m illio n a m ile c o s t fo r
th e
fiv e
fe d e ra lly
a ssiste d
p ro je c ts
n o te d a b o v e , S an D ie g o i s
b u ild in g a tr o lle y lin e , w ith o u t any F e d e ra l a s s is ta n c e ,
c o s tin g le s s th a n $6 m illio n a m ile .

—

T r a n s it sy ste m e n e rg y s a v in g s a r e n o n e x is te n t
or
s m a ll
in
th e s h o r t ru n a n d to o s p e c u la tiv e in th e lo n g ru n to
j u s t i f y m a jo r F e d e ra l in v e s tm e n ts on
en erg y
e ffic ie n c y
g ro u n d s.
It
has
been
e stim a te d
th a t
BART, th e S an
F ra n c is c o B ay A re a r a p id r a i l sy ste m , r e q u ir e d
so
m uch
en erg y
d u rin g i t s c o n s tru c tio n th a t th is i n i t i a l en e rg y
in v e s tm e n t m ay n e v e r b e r e p a id .




sh o u ld

re m a in

p resen t
e c o n o m ic
situ a tio n ,
F ed eral
e m p h a sis
be
c o n c e n tra te d on m a in ta in in g e x is tin g t r a n s i t
th a t h av e p ro v ed e f fe c tiv e and a re an
e sse n tia l
a la r g e u rb a n tr a n s p o r ta tio n n e tw o rk .

5-3

—

U nder th e se c o n d itio n s,
and
th e
im m e d ia te
im p e ra tiv e
need
to
re o rd e r F e d e ra l p r i o r i t i e s , F e d e ra l in v e s tm e n t
in new f ix e d g u id e w a y sy s te m s c a n n o t b e j u s t i f i e d .

T he p ro p o s e d b u d g e t e m p h a siz e s

th e

fo llo w in g :

—

The c e n tra l fo cu s
of
th e
F ed eral
tra
p ro g ram
in
th e
fu tu re
w ill be on th e
im p ro v e m e n t o f e x i s t i n g , p ro v e n t r a n s i t
fu n d in g
f o r b u s and r a i l m o d e rn iz a tio n
c o n tin u e d and in c re a s e d in fu tu re y e a rs .

—

N ew t r a n s i t s y s t e m s a n d p l a n n i n g
a c tiv itie s
w ith su c h sy ste m s w il l no lo n g e r be f e d e r a lly

~

T r a n s i t s y s te m s f o r w h ic h
th e
F ed eral
G o v ern m en t h a s
is su e d
fo rm al
l e t t e r s o f in te n t an d w h ere c o n s tr u c tio n
is
u nd erw ay
w ill
be
fin a n c e d
to
c o m p le te
o p e ra b le
t r a n s i t s e g m e n ts .

—

D o w n to w n P e o p l e M o v e r a n d
U rb an
In itia tiv e s
p ro je c ts
w ill
be
te rm in a te d
in m e d ia te ly
b u t U rb an I n i t i a t i v e s
p r o je c ts a lr e a d y u n d e r c o n s tru c tio n w ill b e c o m p le te d .

P ro p o sed b u d g e t:
B udget a u th o rity ... .
.




a s so c ia te d
fin a n c e d .

(in m illio n s, o f d o lla r s )
1982
1983
1984
1985

1981
C u rren t b ase:
B udget a u th o rity ... .
.
P o lic y re d u c tio n :
B udget a u th o rity ...

n sit
a ssista n c e
m a in te n a n c e an d
s y ste m s.
T hus,
p ro je c ts w ill be

1986

3 ,3 4 0
2 ,7 4 4

3 ,6 5 0
2 ,8 0 0

3 ,7 6 2
3 ,0 1 0

4 ,0 7 0
3 ,3 3 7

4 ,3 6 8
3 ,6 6 9

4 ,6 4 7
3 ,9 9 6

-2 1 0
-3 1

-9 5 0
-2 7 0

-1 ,0 4 7
-5 4 5

-1 ,2 2 0
-9 7 5

-1 ,3 6 8
-1 ,2 8 4

-1 ,4 9 7
-1 ,4 8 0

3 ,1 3 0
2 ,7 1 3

2 ,7 0 0
2 ,5 3 0

2 ,7 1 5
2 ,4 6 5

2 ,8 5 0
2 ,3 6 2

3 ,0 0 0
2 ,3 8 5

3 ,1 5 0
2 ,5 1 6

5-4

Department of Transportation

REDUCTION OF AIRPORT CONSTRUCTION GRANT PROGRAM

The A d m in istra tio n
fu n d in g
a v a ila b le
1986 b y 33% .

w ill p ro p o se le g is la tio n to red u ce th e
annual
fo r
a ir p o r t c o n s tru c tio n g ra n ts d u rin g 1981-

T he n eed to ex pand a ir p o r t c a p a c ity is no lo n g e r so
c ritic a l
as
it
w as in th e p a s t w hen a v ia tio n t r a f f i c in c r e a s e d s i g n i f i c a n t l y
o n a n a n n u a l b a s is an d th e d e v e lo p m e n t o f new
a irc ra ft
re q u ire d
w id e r
and
lo n g e r
ru n w ay s.
The
e ffe c ts
of
th e re d u c tio n on
a v ia tio n sa fe ty w ill
be
n e g lig ib le
s in c e
a lm o st
no
a v ia tio n
a c c id e n ts
are
re la te d
to th e p h y sic a l fe a tu re s o f a irp o rts and
th e v a s t m a jo rity o f fe d e ra lly
a id e d
p ro je c ts
e ith e r
in c re a se
a i r p o r t c a p a c i ty o r p ro m o te o p e r a t io n a l s a f e t y .
F o r 1981 an d 1982# th e re d u c tio n s c o u ld b e ta k e n a c r o s s - th e - b o a r d
in
b o th
e n title m e n t
and
d isc re tio n a ry
g ran t
p ro g ram s.
C o n s id e ra tio n a ls o w ill b e g iv e n to a c h ie v in g th e
re d u c tio n s
by
re stru c tu rin g
th e e x is tin g p ro g ram s an d p o s s ib ly e x c lu d in g la rg e
c o m m e rc ia l
a irp o rts
fro m
g ran t
e lig ib ility .
L arg e
a irp o rts
u su a lly
h av e a s tro n g f in a n c ia l b a s e fro m la n d in g fe e s an d sp a c e
r e n t a l c h a r g e s w ith w h ic h t o f in a n c e
a
c a p ita l
p ro g ram .
Thus
F e d e r a l c o n s tr u c tio n g ra n ts a r e u s u a lly o n ly a s m a ll p o r tio n o f a
la rg e
a i r p o r t 's
c a p ita l
p ro g ram .
I n M ia m i, f o r i n s t a n c e , t h e
F ed eral
c o n stru c tio n
g ra n ts
equal
a p p ro x im a te ly
10%
of
th e
a i r p o r t 's t o t a l p ro g ram .
A t p re se n t,
a u th o riz a tio n s
fo r
th e a irp o r t c o n s tru c tio n g ra n t
p ro g ram h av e e x p ire d .
The
9 6 th C o n g ress
fa ile d
to
act
on
a
le g isla tiv e
p ro p o sal
s u b m itte d
by th e C a rte r a d m in is tra tio n to
e x te n d th e a ir p o r t g ra n t p ro g ram an d to a llo w
c o n tin u e d
use
of
th e
a irp o rt
and
a irw a y t r u s t fu n d to fin a n c e th e p ro g ra m .
The
A d m in is tr a tio n is p ro p o s in g new a u th o r iz in g l e g i s l a t i o n t h a t w i l l
in c lu d e re d u c e d a n n u a l fu n d in g le v e ls .
T o ta l
s a v in g s
of
$ 1 .8
b i l l i o n a re e x p e c te d th ro u g h 1986 a s a r e s u l t o f t h i s p ro p o s a l.
(in m illio n s
1982
1983

1981
C u rren t b ase:
B udget a u th o rity ....
P o lic y re d u c tio n :
B udget a u th o rity ....
P ro p o se d b u d g e t:
B udget a u th o rity ....




o f d o lla rs)
l9 § 4
1985

1986

722
595

750
625

818
671

885
726

950
779

1 ,0 1 1
829

-2 7 2
-1 2 0

250
140

-2 7 8
-1 6 1

-3 0 5
-1 9 6

-3 3 0
-2 1 9

-3 7 1
-2 3 9

450
475

500
485

540
510

580
530

620
560

640
590

5-5

O th e r In d e p e n d e n t A g e n c ie s

EXTEND WA TE R RESOURCE DEVELOPMENT PROJECT CONSTRUCTION

T h e A d m i n i s t r a t i o n w i l l p r o p o s e a n 11% r e d u c t i o n i n
th e
p la n n e d
c o n stru c tio n
p ro g ram
o f th e C o rp s o f E n g in e e r s - C iv il, W a te r an d
Pow er R e so u rc e s S e rv ic e , and S o il C o n se rv a tio n S e rv ic e .
T h is re d u c tio n w ill n o t d e la y th e r e a liz a tio n
o f h y d ro e le c tric ,
m u n ic ip a l
w a te r
su p p ly ,
n a v ig a tio n ,
or
u rb an
flo o d
c o n tro l
f e a t u r e s , b u t w i l l d e f e r som e le s s
c ritic a l
p a rts
of
p ro je c ts
such
a s th e d e v e lo p m e n t o f r e c r e a tio n a r e a s an d som e r u r a l f lo o d
c o n tro l and ir rig a tio n d e liv e rie s .
O n ly a b o u t 70
o
e x p e rie n c e
any
fe a tu re s o n -lin e
e x p e n d itu re s by

f

th e
m o re
d e la y .
The
w ill av erag e
$ 1 .6 b i l l i o n o

th a n
300 p r o je c ts
u nd erw ay
w ill
d e la y s
in
b rin g in g
n o n -c ritic a l
2 y ears
and w ill
red u ce
F ed eral
v er th e n ex t 5 y e a rs .

T hese p ro p o sa ls

re su lt

fo llo w in g

in

th e

changes

in

fu n d in g :

_____________ ( i n m i l l i o n s o f d o l l a r s ) _______________
1981
1982
1983
1964
1985
1986
C u rren t b ase:
B udget a u th o rity .
O u t l a y s ...................................
P o lic y re d u c tio n :
B udget a u th o rity .
O u t l a y s ...................................
P ro p o sed b u d g e t:
B udget a u th o rity .
O u t l a y s ...................................




2 ,4 1 5
2 ,5 2 0

2 ,6 6 0
2 ,6 7 5

3 ,1 2 4
3 ,1 2 0

3 ,2 6 2
3 ,2 5 8

3 ,1 1 3
3 ,1 1 0

2 ,7 7 2
2 ,7 7 2

95
90

340
337

545
544

515
514

215
217

2 ,5 6 5
2 ,5 8 5

2 ,7 8 4
2 ,7 8 3

2 ,7 1 7
2 ,7 1 4

2 ,5 9 8
2 ,5 9 6

2 ,5 5 5
2 ,5 5 5

---------———

2 ,4 1 5
2 ,5 2 0

5-6

Environmental

Protection Agency

REFO RM O F M U N IC IP A L W ASTE TREA TM ENT G RANTS TO REDUCE T H E
C O S T O F A C H IE V IN G E N V IR O N M E N T A L P R O T E C T IO N

T he P re s id e n t is p ro p o sin g
red u ced
a p p ro p ria tio n s
and
a
m o re
c o s t-e ffe c tiv e
ta rg e tin g
o f th e m u n ic ip a l w a ste tr e a tm e n t g ra n t
p ro g ram a d m in is te re d
by
th e
E n v iro n m e n ta l
P ro te c tio n
A gency.
T h is
a c tio n
w ill
red u ce
near
te rm
e x p e n d itu re s
fo r c a p ita l
in v e s tm e n ts ,
c o n s is te n t w ith
th e
need
to
red u ce
F ed eral
e x p e n d itu re s.
T h ro u g h m a jo r re fo rm s to th e p ro g ra m , i t w ill a ls o
re lie v e
th e
b urden
on
th e
F ed eral
G o v ern m en t
fo r fin a n c in g
p r o j e c t s t h a t im p ro v e th e e n v iro n m e n t o n ly m a r g i n a lly o r
not
at
a ll.
T hese
refo rm s
w ill
g re a tly
red u ce
th e c u rre n t F e d e ra l
r e s p o n s i b i l i t y fro m th e
e s tim a te d
$90
b illio n
re q u ire d
under
c u r r e n t la w ; a n d w o u ld d o s o w ith o u t s a c r i f i c i n g o u r o b j e c t i v e o f
c le a n e r w a te r.
T he ch a n g e in th e p ro g ram w ill b e a c h ie v e d by th e fo llo w in g th re e
a c tio n s:
(1 ) a
re sc is sio n
o f $1 b i l l i o n in a p p r o p r ia tio n s f o r
1 9 8 1 ; (2 ) p ro p o s in g le g i s l a ti o n to
re q u ire
F ed eral
fu n d in g
of
o n ly
th o se
p ro je c ts
th a t
are
se le c te d
and
d e sig n e d
to
s i g n i f i c a n t l y im p ro v e th e q u a l i t y o f th e r e c e i v i n g w a te r s in
th e
near
te rm ;
and
(3 ) w ith d ra w in g th e re q u e s t to a p p r o p r ia te 1982
fu n d s u n t il th e re fo rm s h av e b een e n a c te d .
T h ere a re $15 b ill io n
a lr e a d y a p p r o p r ia te d fro m th e T re a s u ry b u t n o t y e t
sp e n t,
w h ic h
w ill
be
used
to c o n tin u e c o n s tr u c tio n on c o m m itte d f a c i l i t i e s .
N ew s t a r t s t h a t w o u ld
have
been
fu n d ed
w ith
th e
1981
fu n ds
p ro p o sed
fo r
r e s c is s io n and w ith th e 1982 a p p ro p ria tio n w ill be
p o stp o n e d u n t il re fo rm le g is la tio n is e n a c te d .
At
th a t
p o in t,
$ 2 .4 b i l l i o n w il l b e p ro p o se d .
S p e c ific
le g isla tio n
w ill
be
fo rw ard ed
to
C o n g ress
by
th e
E n v iro n m e n ta l
P ro te c tio n
A gency
in
th e
near
fu tu re .
T h is
le g isla tio n
w ill
c o n c e n tra te
th e p ro g ram on tre a tm e n t p ro je c ts
th a t d ir e c tly enhance th e q u a lity o f re c e iv in g w a te rs .
P ro je c ts,
or
fe a tu re s
o f p ro je c ts,
th a t
do
not
re su lt
in
d ire c t
e n v iro n m e n ta l
im p ro v e m e n t,
or
w h ic h
f o c u s o n f u t u r e c o m m u n ity
g ro w th w il l
have
to
be
b u ilt,
if
at
a ll,
w ith o u t
F ed eral
a ssista n c e .
E x a m p les
of
p ro je c ts
th a t
w o u ld
no
lo n g e r
be
e l i g i b l e f o r F e d e ra l fu n d in g in c lu d e new in te r c e p to r se w e rs,
th e
fu n d in g
o f
c a p a c ity
to m eet fu tu re p o p u la tio n p ro je c tio n s , and
c o ll e c tio n sew er sy ste m s th a t c o n tr ib u te to u rb a n s p ra w l an d h a v e
a m a rg in a l im p a c t on w a te r q u a li t y .




5-7

(in m i l l i o n s o f d o l l a r s )
19 82
19 83
1984
1985

1981
C u r r e n t base:

B udget a u th o rity ..
O u t l a y s ......................................
P o lic y re d u c tio n :
B udget a u th o rity ..
O u t l a y s ......................................
P ro p o sed b u d g e t:
B udget a u th o rity ..
O u t l a y s ......................................
*

C o n g ress/
1982.




1986

3 ,3 0 5

3 ,6 1 0
4 ,2 2 0

3 ,9 4 0
4 ,2 3 0

4 ,2 6 0
4 ,2 5 0

4 ,5 7 0
4 ,1 0 0

4 ,8 6 5
4 ,1 0 0

. -1 ,0 0 0

-3 ,6 1 0
-12 5

-1 ,5 4 0
-1 ,0 4 5

-1 ,8 6 0
-1 ,9 7 0

-2 ,1 7 0
-1 ,9 6 0

-2 ,4 6 5
-1 ,9 5 0

_____* 2 , 4 0 0
3 ,1 8 5
4 ,0 9 5

2 ,4 0 0
2 ,2 8 0

2 ,4 0 0
2 ,1 4 0

2 ,4 0 0
2 ,1 5 0

.

.
.

2 ,3 0 5
4 ,2 0 0

C o n tin g e n t upon th e e n a c tm e n t o f n e e d e d
refo rm s
an a p p r o p r ia tio n o f $ 2 .4 b i l l i o n w i l l b e re q u e s te d

5-8

by
fo r

th e

6.

IM P O S E F IS C A L R E S T R A IN T ON O T H E R PROGRAM S
O P N A T IO N A L IN T E R E S T

D e p a rtm e n t o f C on snerce

N A T IO N A L O C E A N IC AND A T M O S P H E R IC A D M IN IS T R A T IO N
(D E P A R T M E N T O F CO M M ERC E)

T he N a tio n a l O c e a n ic an d A tm o sp h e ric A d m in is tr a tio n
(N O A A )
does
m any th in g s t h a t we a s a N a tio n v a lu e h ig h ly ( e .g ., h u r r ic a n e and
to rn a d o
w a rn in g s
and
p r o t e c t i o n o f e n d a n g e r e d m a r in e m a m m a ls);
h o w e v e r, S ta te s and l o c a l i t i e s sh o u ld assu m e
re sp o n s ib ility
fo r
th o se
NOAA p r o g r a m s
fro m
w h ich
th e y
d ire c tly
b e n e fit.
The
A d m in is tra tio n w ill th e re fo re p ro p o se a $150 m illio n re d u c tio n in
1 9 8 2 f o r NOAA p r o g r a m s .
F u n d in g
w ill
be
te rm in a te d
fo r
th e
C o a sta l
E n erg y
Im p act P ro g ram
(C E IP )
and
th e
C o a sta l
Zone
M a n a g e m e n t (C Z M ) S t a t e g r a n t p r o g r a m .
F ed eral
g ran t
a ssista n c e
w ill
be
re d u c e d to S ea G ra n t C o lle g e s b y 50% .
In a d d itio n , th e
d e v e l o p m e n t o f t h e N a t i o n a l O c e a n S a t e l l i t e S y s te m (N O S S ) w i l l b e
d eferred .
T h e A d m i n i s t r a t i o n p r o p o s e s t o t e r m i n a t e t h e C E IP p r o g r a m b e c a u s e
th e l o c a l im p a c ts fro m o i l an d g a s d e v e lo p m e n t h a v e p ro v e n to
be
fa r
le ss
th a n
o rig in a lly
a n tic ip a te d
and
w e ll
w ith in
th e
c a p a b ility o f S ta te s
and
lo c a litie s
to
h a n d le .
The
o v e ra ll
c o a sta l
p o p u la tio n
is
o n ly e x p e c te d to in c r e a s e b y a b o u t 8 ,0 0 0
p erso n s a
year
as
a
re su lt
of
c o a sta l
en erg y
d e v e lo p m e n t.
L o u i s i a n a , w h ic h h a s r e c e iv e d a l a r g e p o r t i o n o f C E IP f u n d s , a l s o
r e c e iv e d s e v e ra n c e ta x e s fro m o i l an d g a s — a m o u n tin g to ro u g h ly
$500
m illio n
in
1979.
T hese
fu n d s
c o u ld
be used to a s s is t
p erso n s in re lo c a tin g .
The
CZM p r o g r a m
has
la rg e ly
a c h ie v e d
its
p u rp o se.
S ta te s
c o v e rin g
78%
of
th e c o a s tlin e a lre a d y h av e re c e iv e d 7 y e a rs o f
F e d e r a l a s s i s t a n c e to d e v e lo p , im p le m e n t,
and
a d m in iste r
th e ir
c o a sta l
zone m anagem ent p ro g ram s.
C o n t i n u a t i o n o f t h e S t a t e CZM
p ro g ra m s a n d a n y a d d i t i o n a l im p ro v e m e n ts s h o u ld
be
fin a n c e d
by
th e
S ta te s.
G ran t
re d u c tio n s
to
th e 16 d e s ig n a te d S ea G ra n t
C o lle g e s
are
p ro p o sed
because
th e
research
and
in fo rm a tio n
d e riv e d
fro m th e s e i n s t i t u t i o n s is p r im a r ily o f lo c a l, S ta te , o r
r e g i o n a l b e n e f i t a n d c a n b e c o n d u c t e d w i t h o u t NOAA f u n d i n g .
The
g lo b a l
w e a th e r
d a ta
th a t
c o u ld
be
g e n e ra te d
by
NOSS i s o f
lo n g -te rm s c i e n t i f i c im p o rta n c e , b u t i t can
be
p o s tp o n e d
a t
a
t o t a l G o v ern m en t s a v in g s o f $900 m illio n o v e r th e n e x t 7 y e a r s .
NOAA p r o g r a m
c o sts
o v er th e n ex t 5 y e a rs
o rig in a l
in te n t
o f
a s s is ta n c e o n ly w hen




can th u s be
T hese chan
th e
c o a sta l
e s s e n tia l and

.

6-1

re d u c e d b y m o re th a n $1 b i l l i o n
ges
are
c o n s is te n t w ith
th e
p ro g ram s — to p ro v id e F e d e ra l
fo r fro n t-e n d seed m oney.
The

c o s t o f NOSS i s t o o h i g h a t
th is
tim e
and
o c e a n o g ra p h ic
d a ta
needs
can b e m et th ro u g h o th e r m eans.
T hese changes w ill red u ce
F e d e r a l s p e n d i n g w i t h o u t a f f e c t i n g N O A A 's p r i m a r y m i s s i o n s .
A sh o rt d e sc rip tio n

o f th e

ab o ve p ro g ram s

fo llo w s:

—

The
C o a sta l
E n erg y
Im p act
P ro g ram
(C E IP )
p ro v id e s
F ed eral
a s s is ta n c e to S ta te s and lo c a litie s to p la n fo r
an d m it ig a te th e im p a c t o f c o a s ta l
en erg y
d e v e lo p m e n t
a c tiv itie s .

—

The
C o a sta l
Zone M anagem ent
(C Z M ) p r o g r a m
p ro v id e s
F ed eral
g ran t
a ssista n c e
to
25 S t a t e s t o p r o t e c t a n d
d e v e lo p in a " r a tio n a l" m anner th e ir c o a s ta l z o n e.

—

T he S ea G ra n t p ro g ram w as d e sig n e d
research
c a p a b ilitie s
acro ss
p a r tic ip a tin g Sea G ran t C o lle g e s.

~

The p ro p o se d n a tio n a l ocean s a t e l l i t e
used
to
o b ta in
o c e a n o g ra p h ic
d a ta
p re d ic tio n and to
assess
th e
ro le
d e te rm in in g
th e
w o r ld 's c l im a te .
In
DOD a n d N A S A w o u l d s h a r e i n t h e
$900
N O SS, W h ic h i s i n t h e e a r l y s t a g e s o f

P o lic y re d u c tio n :
B udget a u th o r ity ....
O u t l a y s ..............................................
P ro p o sed b u d g e t:
B udget a u th o rity ....
O u t l a y s ..............................................




sy s te m
w o u ld
be
fo r c i v i l w e a th e r
of
th e
ocean
in
a d d i t i o n t o NOAA,
m illio n
cost
of
d e v e lo p m e n t.

(in m illio n s o f d o lla rs )
1982
1983
1984
1985

1981
C u rren t b a se :
B udget a u th o r ity ..• .

to
d e v e lo p
m a rin e
th e
c o u n try
in

1986

92
145

184
175

224
217

262
265

275
274

268
249

-9
-6

-1 5 2
-6 9

-2 0 2
-1 4 8

-2 3 8
-2 1 6

-2 5 0
-2 5 3

-2 4 1
-2 2 3

83
139

32
106

22
69

24
49

25
21

27
26

6-2

Department of Education

R E D U C T IO N O F SC H O O L A S S IS T A N C E IN F E D E R A L L Y A F F E C T E D A R EA S
(IM P A C T A ID )

T he A d m in is tra tio n re c o g n iz e s th a t th e p rim a ry r e s p o n s ib ili ty fo r
fin a n c in g e le m e n ta ry and se c o n d a ry e d u c a tio n r e s t s w ith S ta te and
lo c a l g o v e rn m e n ts.
F e d e ra l sp e n d in g i s j u s t i f i a b l e o n ly in th o s e
c ir c u m s ta n c e s in w h ic h a c l e a r F e d e r a l r o le
can
be
id e n tifie d .
In
t h e Im p a c t A id p ro g ra m , t h e A d m i n i s t r a t io n p r o p o s e s t o d i r e c t
s c a rc e F e d e ra l re so u rc e s o n ly
to
th o se
school
d istric ts
m ost
se rio u sly
burdened
by
th e
p resen ce
of
n o n ta x a b le
F ed eral
p ro p e rty .
In 1982, a
45%
re d u c tio n
in
th e
m a in te n a n c e
and
o p e ra tio n s
p o rtio n
of
Im p a c t A id w i l l b e a c h ie v e d b y e l i m i n a t i n g p a y m e n ts
fo r c h ild r e n w hose p a re n ts c o n tr ib u te to
th e
su p p o rt
of
th e ir
e d u c a tio n
th ro u g h
S ta te and lo c a l ta x e s.
P a y m e n ts w i l l b e m ade
o n ly to th o s e s c h o o l d i s t r i c t s in w h ic h c h ild r e n w ho
re sid e
and
w hose
p a re n ts
w o r k o n F e d e r a l p r o p e r t y r e p r e s e n t 20% o r m o r e o f
to t a l e n ro llm e n t.
A le g itim a te F ed eral ro le
in
su p p o rtin g
th e
e d u c a tio n
of
th e se
c h ild re n
has
lo n g
been
re c o g n iz e d .
M a in te n a n c e an d o p e r a tio n p a y m e n ts w i l l b e m ade to th e
330 m ost
h e a v ily
burdened
d istric ts
w h ile
S ta te
and
lo c a l
e d u c a tio n
a g e n c ie s w o u ld a ssu m e t o t a l r e s p o n s i b i l i t y in
over
3 ,5 0 0
o th e r
d i s t r i c t s t h a t c u r r e n tly r e c e iv e p a y m e n ts.
G iv e n
p resen t
c o n stra in ts,
i t is no lo n g e r fe a s ib le to p ro v id e
s u b s ta n tia l su p p o rt
under
th e
Im p a c t A id
p ro g ram
to
school
d i s t r i c t s s o le ly on th e b a s is o f th e re s id e n c e p a tte r n o f F e d e ra l
e m p lo y e e s.
W ith
th e
e x c e p tio n o f th e tin y f r a c tio n o f F e d e ra l
e m p lo y e e s w ho a r e e x e m p t fro m in c o m e ta x e s
in
th e
D istric t
of
C o lu m b ia
by
v irtu e
o f e m p lo y m e n t w ith a C o n g re s sm a n fro m t h e i r
hom e s t a t e , a l l o th e r F e d e r a l e m p lo y e e s p a y
sta te
in c o m e ,
real
p ro p e rty ,
and
p erso n al
p ro p e rty
t a x e s i n t h e j u r i s d i c t i o n s .in
w h ic h th e y liv e in a m an n er no d i f f e r e n t th a n o th e r c i t i z e n s .
To
th e e x t e n t t h a t w e ll- p a id F e d e r a l e m p lo y e e s au g m e n t th e ta x
base
of
th e re g io n s in w h ic h th e y l i v e , th e r e i s no j u s t i f i c a t i o n f o r
a d d i t i o n a l F e d e r a l p a y m e n ts t o th e s c h o o ls
to
w h ic h
th e y
send
th e i r c h ild re n s o le ly on th e g ro u n d s o f re s id e n c e .
The
fo llo w in g
s p e c ific
p ro g ram
ch a n g es w ill b e m ade fo r 1 98 2.
P a y m e n ts w i l l b e m ad e f o r "A " c h i l d r e n
in
"S u p er A"
d istric ts
(th o se
d istric ts
w i t h 20% o r m o r e "A " c h i l d r e n e n r o l l e d ) a t 90%
e n t i t l e m e n t ; p a y m e n ts f o r "A " l o w - r e n t h o u s i n g c h i l d r e n i n " S u p e r
A " d i s t r i c t s w i l l b e l i m i t e d t o 20% e n t i t l e m e n t ; a n d p a y m e n t s
to
"B "
m ilita ry
or
c iv ilia n c h ild re n w ill be e lim in a te d .
In 1981
th e p a y m e n ts f o r m a in te n a n c e an d o p e r a tio n s a s s i s t a n c e
w o u ld
be
m ade
a t
90% o f a d i s t r i c t ' s e n t i t l e m e n t t h r o u g h a r e s c i s s i o n o f
$67 m illio n .




6-3

(in m i l l i o n s o f d o l l a r s )
1982
1983
1984
1985

1981
Current base:

B udget a u th o rity ....
O u t l a y s ..............................................
P o lic y re d u c tio n :
B udget a u th o r ity ....
O u t l a y s ..............................................
P ro p o sed b u d g e t:
B udget a u th o r ity ....
O u t l a y s ..............................................




1986

790
932

875
888

953
968

1 ,0 3 2
1 ,0 4 7

1 ,1 0 7
1 ,1 2 7

1 ,1 7 8
1 ,1 9 6

-6 7
-8 2

-4 7 4
-4 5 0

-52 3
-5 0 0

-5 6 7
-5 5 1

-6 0 8
-5 8 4

-6 3 2
-6 1 3

723
850

401
438

430
468

465
496

499
543

546
583

6-4

Department of Education

R E D U C IN G F U N D IN G FO R V O C A T IO N A L E D U C A T IO N

T h e A d m i n i s t r a t i o n w i l l p r o p o s e a 20% r e d u c t i o n i n
fu n d in g
fro m
th e
C a r t e r 1 9 8 2 b u d g e t r e q u e s t f o r t h e D e p a rtm e n t o f E d u c a t i o n 's
V o c a tio n a l E d u c a tio n p ro g ram .
T he V o c a tio n a l E d u c a tio n A ct p ro v id e s
fo r
F ed eral
su p p o rt
of
v o c a tio n a l
e d u c a tio n
p ro g ram s.
M ost
o f th e fu n d in g fo r th e s e
p ro g ra m s i s th ro u g h fo rm u la g r a n ts to th e S ta te s ,
w h ich
re q u ire
th e
S ta te s
to m a tc h F e d e r a l d o l l a r s .
S ta te and lo c a l e d u c a tio n
a g e n c ie s c u r r e n t l y p r o v id e m o re th a n $10 f o r e v e ry F e d e r a l d o l l a r
s p e n t fo r v o c a tio n a l e d u c a tio n .
T h erefo re, F ed eral
e x p e n d itu re s
at
th e
cu rren t
se rv ic e s
le v e l
are
n o t needed to en su re th a t
s ig n if ic a n t v o c a tio n a l e d u c a tio n p ro g ram s a re c a r r ie d on
in
th e
S ta te s.
C o n tin u e d h ig h le v e ls o f F e d e ra l v o c a tio n a l e d u c a tio n fu n d in g can
no
lo n g e r
be
ju stifie d
on
th e g ro u n d s th a t F e d e ra l fu n d s a re
re q u ire d
to
le v e ra g e
S ta te
and
lo c a l
reso u rces
to
p ro v id e
v o c a tio n a l e d u c a tio n s e rv ic e s to s p e c ia l ta r g e t p o p u la tio n s .
The
p o p u la tio n s th a t u s u a lly m ost re q u ire F e d e ra l su p p o rt a re n o t th e
m a jo r
fo cu s o f th e p ro g ram s.
In sch o o l y e a r 1 9 7 8 -7 9 , o n ly ab o u t
15% o f
to ta l
v o c a tio n a l
e d u c a tio n
p ro g ram
p a rtic ip a n ts
w ere
d isa d v a n ta g e d ,
h a n d ic a p p e d ,
or
had
lim ite d
E n g lish
s p e a k in g
a b ility .
T h e p r o p o s e d 20%
re d u c tio n
in
budget
a u th o rity
w ill
n e g lig ib le
e f f e c t on v o c a tio n a l e d u c a tio n e n ro llm e n t s in
an d l o c a l e x p e n d itu re s f a r o u tw e ig h F e d e ra l
a p p ro p ria tio
recen t
y e a rs , p a r tic ip a tio n in v o c a tio n a l e d u c a tio n p ro g
c o n tin u e d to in c r e a s e ev e n th o u g h th e r e h a v e
been
v irtu
in c re a s e s in F ed eral a p p ro p ria tio n s .
in m illio n s
1983
1982

1981
C u rren t b ase:
B udget a u th o rity
O u t l a y s ...............................
P o lic y re d u c tio n :
B udget a u th o rity
O u t l a y s ...............................
P ro p o sed b u d g e t:
B udget a u th o rity
O u t l a y s ................




have
c e S ta
ns.
ram s h
a lly

a
te
In
as
no

o f d o lla rs
1984
1985

1986

779
767

859
962

910
962

974
881

1 ,0 3 9
1 ,0 1 5

1 ,1 0 4
1 ,0 6 8

--------

-2 3 6

-----

-2 2 0

-2 4 2
-2 4 2

-2 5 9
-2 5 2

-2 7 7
-2 6 9

-2 9 4
-2 8 3

779
767

623
742

668
720

715
629

762
746

810
785

6-5

Department of Education

R E D U C T IO N O P F U N D IN G FO R T H E N A T IO N A L IN S T IT U T E O F E D U C A T IO N

The A d m in is tra tio n
w ill
w ith d ra w
th e
$5 m i l l i o n
s u p p lm e n ta l
p ro p o sed
by th e C a rte r a d m in is tra tio n fo r th e N a tio n a l I n s t itu te
o f E d u c a tio n (N IE ) f o r 1981 an d re d u c e fu n d in g f o r
N IE
in
1982
and
s u c c e e d in g
y ears
by
25% .
The re s e a rc h and d is s e m in a tio n
a c tiv itie s
of
th e
N IE ,
w h ile
o c c a sio n a lly
m a k in g
v a lu a b le
c o n trib u tio n s
to
th e
th e o ry
and p ra c tic e o f e d u c a tio n , a re o f
r e l a t i v e l y lo w p r i o r i t y g iv e n p r e s e n t b u d g e ta r y c o n d i t i o n s .
N IE f u n d s r e s e a r c h a n d d e m o n s t r a t i o n a c t i v i t i e s i n
th re e
area s:
b a sic
e d u c a tio n a l
research ,
e d u c a tio n a l
o rg a n iz a tio n
and
a d m in is tra tio n , and d is s e m in a tio n o f th e r e s u lts o f re s e a rc h
and
d e m o n stra tio n s
to
p r a c titio n e r s in th e f ie ld .
W h ile th e l a t t e r
a c tiv ity ca n , in c e r ta in in s ta n c e s ,
have
im m e d ia te
p ay o ffs
in
im p ro v e d
e d u c a tio n a l
p ra c tic e
at
th e
lo c a l
le v e l, th e o th e r
a c t i v i t i e s o f t h e N IE p a y o f f , i f a t a l l , o n ly i n t h e l o n g e r r u n .
W h ile b a s i c e d u c a tio n a l r e s e a r c h h a s v a lu e , d e f e r r a l s a n d s t r e t c h
o u ts o f w ork c u r r e n tly u nd erw ay can a c h ie v e s ig n if ic a n t b u d g e ta ry
s a v in g s w ith o u t re d u c in g
th e
a b ility
of
th e
N IE
to
su p p o rt
im p ro v e m e n ts in c u r r e n t e d u c a tio n a l p r a c t i c e .
The A d m in is tra tio n
p ro p o sal
p ro v id e s
th e
S e c r e ta r y o f E d u c a tio n w ith c o n s id e r a b le
f l e x i b i l i t y to r e a l l o c a t e re m a in in g fu n d s
to w a rd
th o se
e ffo rts
th a t
w ill
re su lt
in
c o n tin u e d
im p ro v e m e n ts
in
e d u c a tio n a l
p ra c tic e .
A s a r e s u l t o f t h e s e r e d u c t i o n s , N IE w i l l b e p r o v i d e d w i t h b u d g e t
a u th o r it y o f $74 m illio n in 1981 an d $61 m illio n in 1 9 8 2 .
B udget
a u t h o r i t y w i l l b e r e d u c e d b y 25% a n n u a l l y o r b y $ 1 1 7 m i l l i o n o v e r
th e n e x t 5 y e a r s .

(in m illio n s o f d o lla r s )
1982
1983
1984
1985

L981
C u rren t b a se :
B udget a u th o rity ...
O u t l a y s ...........................................
P o lic y re d u c tio n :
B udget a u th o rity ...
O u t l a y s ...........................................
P ro p o sed b u d g e t:
B udget a u th o rity ...
O u t l a y s ...........................................




1986

74
71

81
80

87
83

94
88

100
93

105
100

-------

-2 0
-2 2

-2 2
-2 0

-2 3
-2 0

-2 5
-2 1

-2 7
-2 2

74
71

61
58

65
63

71
68

75
72

78
78

6-6

Department of Education

R E D U C IN G F E D E R A L S U P P O R T TO M USEUM S

T h e A d m i n i s t r a t i o n p r o p o s e s t o t e r m i n a t e t h e I n s t i t u t e f o r M useum
S e r v i c e s , w h ic h a w a rd s g r a n ts t o m useum s p r i n c i p a l l y f o r
g en eral
o p e ra tin g
su p p o rt.
T h is
p ro p o sal
is
p art
of
an
o v e ra ll
A d m in istra tio n e f f o r t to
re th in k
F ed eral
su p p o rt
of
c u ltu ra l
a c tiv itie s .
W h ile
m useum s
and
o th e r re p o s ito rie s o f c u ltu ra l
a r t i f a c t s a r e im p o rta n t in o u r s o c ie ty , th e y
have
tra d itio n a lly
been
th e
b e n e fic ia rie s
of
p riv a te
p h ila n th ro p y ,
fo r
b o th
c o n s tru c tio n and o p e ra tin g fu n d s.
I t is tr u e th a t th e o v e ra ll d e c lin e
in
e c o n o m ic
c o n d itio n s
in
recen t
y ears
and
p u n ish in g ly
h ig h
p e rso n a l and c o rp o ra te ta x
r a te s h av e d iv e rte d p riv a te c a p ita l in to ta x s h e lte r s r a th e r th a n
e x p e n d itu r e s t h a t b e n e f i t s o c ie ty a s a w h o le .
The A d m in istra tio n
p ro p o s e s to a t ta c k th e s e p ro b le m s d i r e c t l y , h o w e v e r, th ro u g h
its
o v e ra ll
e c o n o m ic
p ro g ram .
A h e a lth y and e x p a n d in g econom y w ill
p r o v id e f a r m o re e f f e c t i v e s u p p o rt f o r c u l t u r a l
a c tiv itie s
th a n
any re a s o n a b le am ount o f e x p lic it F e d e ra l su p p o rt.
The
change
w ill
be
m illio n fo r 1981 and a
e lim in a te
fu n d s
fo r
s u p p o rt w ill b e m a in ta
agency a c tiv itie s .

a c h ie v e d b y p ro p o sin g a r e s c is s io n o f -$ 1 2
-$ 1 6 m illio n b u d g e t am endm ent f o r 1982
to
g ra n ts
to
m useum s.
Som e a d m in is tr a ti v e
in e d th ro u g h 1982 in
o rd er
to
phase
out

(in m illio n s
1983
1982

1951
C u rren t b ase:
B udget a u th o rity
O u t l a y s ...............................
P o lic y re d u c tio n :
B udget a u th o rity
O u t l a y s ...............................
P ro p o se d b u d g e t:
B udget a u th o rity
O u t l a y s ...............................

1954

158?

19§6

13
13

14
12

15
13

16
14

18
16

19
18

# * •

-1 2
-2

-1 4
-1 2

-1 5
-1 3

-1 6
-1 4

-1 8
-1 6

-1 9
-1 8

• ■ •

1
11

*
2

• * *

* $ 5 0 0 , 0 0 0 o r less.




o f d o lla rs)

6-7

--------

---------

Department o f Energy

R E D U C T IO N S IN EN ERG Y R E G U L A T IO N I N TH E D EPA RTM EN T O F EN ER G Y

The
P re sid e n t's
c o m m itm e n t t o
e n d in g
u n n ecessary
G o v ern m en t
re g u la to ry
p ro g ram s w ill p e rm it a s iz e a b le re d u c tio n in s p e n d in g
an d re m o v a l o f l a r g e n u m b ers o f F e d e r a l e m p lo y e e s fro m G o v e rn m e n t
p a y ro lls .
O il d e c o n tro l h a s e n a b le d
th e
P re sid e n t
to
p ro p o se
e lim in a tio n
of
th e
D e p a rtm e n t o f E n e rg y r e g u la to r y a c t i v i t i e s
t h a t w e re d e s ig n e d to c o m p e n sa te f o r th e
m a rk e tp la c e
im b a la n c e s
caused
by
p ric e c o n tro ls on o il.
D e p a rtm e n t o f E n e rg y p ro g ra m s
such as th e p ric e and
a llo c a tio n
re g u la to ry
fu n c tio n s
of
th e
E c o n o m ic R e g u la t o r y A d m i n i s t r a t i o n , i n t e r v e n t i o n s i n S t a t e p u b l i c
u tility
p ro c e e d in g s,
m a n d a to ry
fu e l-u se
r e s tr ic tio n s , and th e
cu m b erso m e c o u p o n r a t i o n i n g sy ste m w il l b e c o m p le te ly
e lim in a te d
o r re p la c e d b y s tre a m lin e d p ro g ram s re ly in g on m a rk e t f o r c e s .
The p ro p o se d re d u c tio n s to ta l $150 m illio n ,
fro m 1982 b u d g e t a u th o r it y le v e ls .
The
p ro g ram
changes
ch an g es in fu n d in g :

are

e x p e c te d




re s u lt in

(in m illio n s
1982
1983

1981
C u rren t b ase:
B udget a u th o r ity ... .
O u t l a y s ..............................................
P o lic y re d u c tio n :
B udget a u th o rity .. .
O u t l a y s ..............................................
P ro p o sed b u d g e t:
B udget a u th o r ity ....
O u t l a y s ..............................................

to

o r a re d u c tio n
th e

o f 57%

fo llo w in g

o f d o lla rs)
1984
1985

1986

260
262

261
249

243
244

233
234

232
228

225
224

-3 3
-3 3

-1 5 0
-1 2 7

-1 3 8
-1 4 0

-1 3 1
-1 3 2

-1 2 7
-1 2 3

-1 1 8
-1 1 7

227
229

111
122

105
104

102
102

105
105

107
107

6-8

D e p a rtm e n t

R E D U C T IO N

IN

D EPAR TM ENT O P

EN E R G Y

GENERAL

S C IE N C E

o f

E n ergy

PROGRAMS

As p a r t o f i t s o v e r a ll
p o lic y
of
r e d u c in g
fu n d in g
le v e ls
to
a s s is t
i n r e s o l v i n g t h e N a t i o n ' s f i s c a l and e c o n o m ic c r i s i s , t h e
A d m in is tr a tio n
p rop oses
a
r e d u c tio n
of
$40
m illio n
in
th e
D e p a r tm e n t
o f E n e r g y 's g e n e r a l s c i e n c e p r o g r a m s i n l i f e s c i e n c e s
an d n u c l e a r m e d i c i n e , h i g h -e n e r g y p h y s i c s , and
n u c le a r
p h y s ic s .
T h is
r e d u c t io n w i l l s t i l l p r o v id e an in c r e a s e o v e r 1 9 8 1 t o c o v e r
a n t i c i p a t e d i n f l a t i o n i n r e c o g n i t i o n o f th e im p o r ta n c e
of
b a s ic
research
i n t h e s e a n d o t h e r f i e l d s o f t h e n a t u r a l s c i e n c e s a s an
in v e s tm e n t in th e N a t io n ' s f u t u r e .
T h ese
p rogram s,
e s p e c ia lly
h ig h -e n e r g y
p h y s ic s ,
depend
u p on
la r g e ,
c o m p le x f a c i l i t i e s and in s t r u m e n t s t o c o n d u c t t h e i r b a s i c
e x p e r im e n ts .
The c o s t o f o p e r a t i o n
and
m a in te n a n c e
fo r
th ese
fa c ilitie s
has
s u b s ta n tia lly
in c r e a s e d
in
recen t
years,
p a r t i c u l a r l y w ith r i s i n g e n e rg y c o s t s *
The s p e c i f i c im p a c ts o f t h e s e
r e d u c tio n s
w ill
be
a
te m p o ra ry
s t r e t c h -o u t
o f new c o n s t r u c t i o n , a g e n e r a l d e c r e a s e i n o p e r a t i n g
l e v e l and u t i l i z a t i o n ,
a
gen eral
r e d u c tio n
in
th e
le v e l
of
e x p e r im e n ta tio n
fo r
m e d i u m -e n e r g y
n u c le a r
p h y s ic s ,
n u c le a r
m e d ic in e and l i f e s c i e n c e s ,
and
d e fe r r a ls
of
new
a c c e le r a to r
c o n s tr u c tio n a t u n iv e r s it ie s .
In
1 9 8 3 and b e y o n d , th e A d m in is t r a t io n
o f e f f o r t f u n d i n g t h a t w o u ld e n s u r e t h e
r e s e a r c h a c t i v i t i e s in th e fu t u r e .

(in m illio n s
1982
1983

1981
C u rren t b a se :
B u d g e t a u t h o r i t y . .• •
O u t l a y s ............ .......................
P o lic y r e d u c tio n :
B udget a u t h o r i t y ....
O u t l a y s ...................................
P roposed b u d g e t:
B udget a u t h o r i t y ..• O u t l a y s ....................................




p r o je c ts a c o n sta n t
v i a b i li t y o f th e se

o f d o lla r s )
1984
1985

le v e l
b a s ic

1986

504
510

607
602

653
651

708
708

755
755

801
801

~5
“4

-4 0
-2 9

-4 5
-4 3

-6 1
-6 1

-7 2
-7 2

-8 4
-8 4

499
506

567
573

608
608

647
647

683
683

717
717

6 -9

D e p a rtm e n t

o f

E n ergy

ELIM IN ATIO N OF EXCESSIVE ENERGY INFORMATION AND
DEPARTMENTAL OVERHEAD A C T IV IT IE S

As p a r t o f th e e f f o r t
to
red u ce
e x c e s s iv e
F ederal
G overn m en t
overhead
co sts
and b u rd e n so m e i n f o r m a t io n g a t h e r i n g a c t i v i t i e s ,
th e
A d m in is tr a tio n
p la n s
a
s ig n ific a n t
r e o r ie n ta tio n
an d
r e d u c tio n
in
th e
d a ta
and
a n a ly tic
s e r v ic e s
of
th e E n ergy
I n fo r m a t io n A d m i n i s t r a t i o n (E IA ) in
th e
D e p a r tm e n t
of
E n ergy.
V a r io u s d e p a r t m e n t -w id e s u p p o r t and a d m i n i s t r a t i v e f u n c t i o n s w i l l
a l s o b e c u t b a c k c o n s i s t e n t w ith d im in is h e d a c t i v i t y e ls e w h e r e i n
th e D e p a r tm e n t.
T he b u d g e t f o r E IA p r o g r a m s h a s g ro w n s i g n i f i c a n t l y i n t h e p a s t 4
years.
Much
of
th is
g ro w th
has
been
t o c r e a t e new o r m o re
d e t a i l e d d a t a s y s t e m s and r e f i n e d a n a ly s e s o f
lim ite d
p r a c tic a l
v a lu e .
A s a r e s u l t , t h e G o v e r n m e n t h a s c r e a t e d a g r o w i n g dem and
f o r e n e r g y c o n s u l t a n t s and s t a t i s t i c i a n s .
T he
prop osed
change
w ill
reverse
t h e t r e n d to w a r d e v e r m o re d e t a i l e d s t a t i s t i c s an d
a ssessm e n ts.
E IA e f f o r t s W i l l b e
fo c u s e d
on
b a s ic
o il,
gas,
c o a l,
and
e le c tr ic
u tility
d a t a s y s t e m s , w i t h im p r o v e m e n t s i n
t h e s e s y s t e m s m ade a s w a r r a n t e d , a n d o n
p u b lic a tio n s
of
proven
v a lu e ,
such
as
t h e M o n th ly E n e rg y R e v ie w .
E m p h a s is w i l l b e o n
n a tio n a l le v e l d a ta ; S ta te le v e l d a ta , c o s t ly to c o l l e c t , w i ll be
cut
back.
R e c e n tly
crea ted
sy ste m s
th a t
have
produced
in fo r m a tio n
r e a d ily
a v a ila b le
e ls e w h e r e
w ill be s ig n if ic a n t ly
red u ced o r e lim in a t e d .
A n a ly t ic a l e f f o r t s w i l l be r e o r ie n te d
to
p r o v id e
f a s t e r , m o re r e l e v a n t a n a l y s i s and e l i m i n a t e d u p l i c a t i o n
w ith o t h e r D e p a rtm e n t o f E n e rg y
o ffic e s .
R educed
a c tiv ity
of
o th e r
E nergy
D e p a r t m e n t u n i t s w i l l a l s o r e d u c e t h e n e e d f o r E IA
su p p o rt.
E n e rg y D e p a rtm e n t o v e r h e a d
a c tiv itie s
su ch
as
a c c o u n tin g
and
person n el
are
p rop osed
to
be
cut
b a c k l a r g e l y t o c o m p le m e n t
r e d u c t i o n s p r o p o s e d f o r o t h e r a r e a s o f t h e D ep a r tm e n t o f
E n ergy.
O th e r
p r o p o s e d d e c r e a s e s o c c u r i n d e p a r tm e n t-w id e f u n c t i o n s su c h
as
p o lic y
a n a ly s is ,
in te r n a tio n a l
en ergy
a c tiv itie s ,
p u b lic
in fo r m a tio n
and
o t h e r p r o g r a m s f o r w h ic h t h e r e i s now l e s s n e e d
b e c a u se m arket f o r c e s w i l l b e p la y in g a la r g e r r o le in
r e s o lv in g
en ergy is s u e s .
To
a c h ie v e th e s e r e s u l t s , th e P r e s id e n t w i l l
b u d g e t a m e n d m e n ts a s w e l l a s a n y
le g is la tio n
d a t a r e q u ir e m e n ts w r i t t e n i n t o la w .

p rop ose
needed

a p p r o p r ia te
to
redu ce

The
p rop osal
is
e x p e c te d
to
red u ce
E IA
and
d e p a rtm e n ta l
a d m in is tr a tio n b u d get a u th o r ity by $38 m illio n o r
10*
in
1982.
T o t a l fu n d in g r e q u ir e m e n ts and c h a n g e s a r e a s f o l l o w s :




6 -1 0

_____________ ( i n

m illio n s

o f

d o l l a r s ) ______________

1981
C u rren t

1982

1983

1984

1985

1986

366
356

398
387

405
405

414
414

423
423

431
431

-1 3
-3

-3 8
-2 7

-6 2
-6 2

-6 7
-6 7

-7 3
-7 3

-7 8
-7 8

353
353

360
360

343
343

347
347

350
350

353
353

b a se:

B udget a u t h o r i t y ....
O u t l a y s ...................................
P o lic y r e d u c tio n :
B u dget a u t h o r i t y .. . .
O u t l a y s ...................................
P rop osed b u d g e t:
B udget a u t h o r i t y .. . .




6 -1 1

H e a lth

and

H um an

S e r v ic e s

MODERATE GROWTH FOR THE NATIONAL IN STITU TES OF HEALTH

R e f l e c t i n g t h e A d m i n i s t r a t i o n ' s c o m m itm en t t o F e d e r a l s u p p o r t
of
e s s e n tia l
b io m e d ic a l r e s e a r c h a c t i v i t i e s , fu n d in g i n c r e a s e s w i l l
b e p r o p o s e d f o r c o n t i n u e d g r o w th o f t h e
N a tio n a l
In s titu te s
of
H e a lth
(N IH ).
NIH
p r o v id e s
su p p ort
fo r b io m e d ic a l r e s e a r c h ,
p r i m a r i ly th ro u g h
N I H 's
e le v e n
In s titu te s .
R esearch
p r o je c t
g r a n t s , made m o s t l y t o i n d i v i d u a l r e s e a r c h e r s and r e s e a r c h t e a m s ,
accoun t
fo r
a p p r o x im a te ly
o n e - h a l f o f N I H 's b u d g e t .
O t h e r NIH
fu n d s s u p p o r t a v a r i e t y
of
research
and
tr a in in g
a c tiv itie s ,
in c lu d in g
t h e NIH i n t r a m u r a l r e s e a r c h p r o g r a m , r e s e a r c h c e n t e r s ,
and c o n t r a c t s .
T h is
fu n d in g
w ill
a llo w
c o n tin u a tio n
of
p r e v io u s
years'
c o m m itm e n ts
and
p e r m it
s u b s ta n tia l
n u m b ers o f new a w a r d s e a c h
year.
As p a r t o f a
gen eral
e ffo r t
to
a c h ie v e
e c o n o m ie s
an d
redu ce
lo w e r p r i o r i t y a c t i v i t i e s , h o w e v e r, th e fu n d in g i n c r e a s e s
w i l l n o t f u l l y co v e r p r o je c te d in f la t i o n .
R eal r e d u c tio n s
b e lo w
t h e c u r r e n t b a s e w i l l b e m ade a c r o s s a l l NIH I n s t i t u t e s .
D e s p ite
th e se
o v e r a ll
r e d u c tio n s ,
h ow ever, th e A d m in is tr a tio n
r e m a i n s c o m m i t t e d t o NIH r e s e a r c h p r o j e c t g r a n t s a s a v e h i c l e f o r
s tim u la tin g s c i e n t i f i c
b re a k th ro u g h s
th a t
re tu rn
b e n e fits
to
s o c i e t y f a r i n e x c e s s o f t h e F e d e r a l c o m m itm e n t o f f u n d s .
One o f t h e p r i n c i p a l a r e a s o f r e d u c t i o n w i l l b e t h e i n s t i t u t i o n a l
p a y m e n ts
m ade
fo r
NIH
(a n d o t h e r ) r e s e a r c h t r a i n i n g u n d e r t h e
n a t i o n a l r e s e a r c h s e r v i c e a w a r d s (NRSA) p r o g r a m .
T h is
p rop osal
w o u ld
e lim in a te
th e
cu rren t
p r a c tic e
of
p a y in g
m o re
t o an
i n s t i t u t i o n f o r a F e d e r a lly su p p o rte d t r a i n e e th a n i s c h a rg e d
in
tu itio n
a n d f e e s t o n o n - f e d e r a l l y s u p p o r t e d s t u d e n t s a t t h e sam e
in s titu tio n .
A l l t r a i n e e s w o u ld c o n t i n u e t o r e c e i v e
aw ards
fo r
t h e i r t u i t i o n , f e e s , and l i v i n g e x p e n s e s .
For
1981,
th e
A d m in is tr a tio n
w ill
requ est
budget
a u th o r ity
r e d u c t i o n s t o t a l i n g $ 1 2 6 m i l l i o n b e l o w t h e NIH c u r r e n t
base
but
s till
a llo w in g
a $89 m illio n in c r e a s e o v e r th e 1 980 l e v e l .
For
1 9 8 2 , a f u r t h e r i n c r e a s e o f $ 2 4 6 m i l l i o n , fr o m
$ 3 .5
b illio n
to
n e a r ly
$ 3 .8
b i l l i o n in b u d g et a u t h o r it y , w i l l be r e q u e s te d .
In
a d d it io n , th e A d m in is tr a tio n w i l l p rop o se
th a t
th e
le g is la tiv e
r e q u ir e m e n t
fo r
th e
in s titu tio n a l
p a y m e n ts
under
NRSA
be
e lim in a t e d .
T he r e d u c t i o n s a r e
f u n d i n g f o r N IH :




e x p e c te d

to

r e s u lt

6 -1 2

in

th e

fo llo w in g

changes

in

1981
C u rrent b a se :
B udget a u t h o r i t y .. .
O u t l a y s ................................
P o lic y r e d u c tio n :
B udget a u t h o r i t y ...
O u t l a y s ................................
P rop osed b u d g e t:
Budget a u t h o r i t y ...
O u t l a y s ................................

.
.

(in m illio n s
1982
1983

o f d o lla r s )
L984
1985

3 ,9 6 1
3 ,7 3 1

4 ,2 5 0
4 ,0 0 3

4 , 514
4 ,2 5 1

4 ,7 6 2
4 ,4 8 5

5 ,0 0 0
4 ,7 0 9

-1 2 6
-5 4
.
.

3 ,6 4 4
3 ,4 3 2

-1 9 7
-1 4 5

-3 7 3
-3 3 6

-5 1 2
-4 6 8

-6 2 8
-5 8 4

-7 2 6
-6 8 2

3 ,5 1 8
3 ,3 7 8

3 ,7 6 4
3 ,5 8 6

3 ,8 7 7
3 ,6 6 7

4 ,0 0 2
3 ,7 8 3

4 ,1 3 4
3 ,9 0 1

4 , 274
4 ,0 2 7

N o t e : E l i m i n a t i o n o f NRSA i s e x p e c t e d t o r e s u l t
change
i n f u n d i n g f o r t h e A l c o h o l , D rug A b u s e ,
A d m i n i s t r a t i o n (n o t in c lu d e d a b o v e ) :
Budget a u t h o r i t y ....
O u t l a y s ...................................




1986

-4
-1

-5
-4

6 -1 3

-5
-4

in th e
fo llo w in g
and M e n ta l H e a lt h

-6
-6

-6
-5

-7
-6

H e a lth

E L IM IN A T E

M E D IC A L

S E R V IC E S

E N T IT L E M E N T

and

H u m an

FOR .MERCHANT

S e r v ic e s

SEAM EN

The P u b l i c H e a l t h S e r v i c e (PH S) h a s o p e r a t e d a
w h o lly
fe d e r a lly
f i n a n c e d m e d i c a l c a r e s y s t e m f o r m e r c h a n t se am en s i n c e 1 7 9 8 .
The
o r ig in a l
p u rp ose
of
th e
e n t i t l e m e n t w as t o p r o t e c t t h e N a t i o n
fr o m c o m m u n ic a b le d i s e a s e s t h a t c o u l d b e b r o u g h t i n t o t h e c o u n t r y
fr o m f o r e i g n
p o rts
at
a
tim e
when
th e r e
w ere
fe w
m e d ic a l
fa c ilitie s
in
A m e r ic a n
port
c itie s .
Today, th o se c i t i e s have
s u f f i c i e n t m e d ic a l f a c i l i t i e s .
M o reo v e r, th ro u g h th e y e a r s , t h i s
e n t i t l e m e n t h a s b e e n e x p a n d e d fr o m m e r c h a n t
se a m e n
to
m erchant
seam en
u n io n
m em bers — i n c l u d i n g t u g b o a t o p e r a t o r s , f i s h e r m e n ,
o f f s h o r e d r i l l i n g c rew m e n , and o t h e r s i n a d d i t i o n
to
o c e a n g o in g
seam en .
T h u s , a p r o g r a m t h a t w as o r i g i n a l l y d e s i g n e d t o p r o v i d e
o c c a s i o n a l o n s h o r e b e n e f i t s f o r seam en who s p e n t
m ost
of
th e ir
days
at
sea
has
becom e,
in
e f f e c t , a f r e e G overn m ent h e a l t h
d e liv e r y
program
fo r
s e le c te d
c la s s e s
of
o c c u p a tio n s .
The
A d m in is tr a tio n
w ill
s e e k r e p e a l o f t h i s e n t it le m e n t and c lo s u r e
o f t h e r e m a i n i n g e i g h t PHS h o s p i t a l s and 2 9 c l i n i c s now p r o v i d i n g
fr e e m e d ic a l c a r e .
The PHS h o s p i t a l a n d c l i n i c s y s t e m , m o r e o v e r , i s
u n d e r -u s e d
and
a c tu a lly
a g g ra v a tes
h e a lth
care
co sts
in
c itie s
w h ere
th e
h o s p it a ls a re lo c a te d .
Im p r o v e d h e a l t h , t h e
d e c lin in g
s iz e
of
th e
o c e a n g o in g
m erchant
fle e t,
and t h e g ro w th o f c o l l e c t i v e l y
b a r g a i n e d h e a l t h c a r e p l a n s h a v e l e d t o lo w d em a n d s
on
th e
PHS
h o s p ita l
sy ste m .
O ccupan cy r a t e s o f th e h o s p i t a l s h a v e a v e r a g e d
a b o u t 60% s i n c e 1 9 7 6 , c o m p a r e d t o n a t i o n a l m inim um
sta n d a rd s
of
80%
occupancy.
In a d d i t i o n , a l l o f th e h o s p i t a l s a r e lo c a t e d in
a r e a s w ith an e x c e s s s u p p ly o f h o s p i t a l
bed s,
and
a ll
of
th e
e ig h t
a ffe c te d
c itie s
h ave a t l e a s t one o th e r F e d e r a l f a c i l i t y
o p e r a t i n g a t l e s s t h a n 80% o c c u p a n c y
to
care
fo r
n o n -m e r c h a n t
se a m e n
p a tie n ts
e n title d
to F ederal c a r e .
T h u s, t h i s p r o p o s a l
w i l l a f f e c t a p p r e c i a b l y n e i t h e r m e r c h a n t s e a m e n 's a c c e s s t o c a r e ,
n o r t h e e i g h t c i t i e s w h e re t h e h o s p i t a l s a n d c l i n i c s a r e l o c a t e d .
M o st o f t h e h o s p i t a l s and c l i n i c s h a v e a l s o b e e n s e r v i n g a
s m a ll
nu m ber
of
lo w -in c o m e
p e o p le
in
th e ir
areas,
la r g e ly
on an
o u tp a tie n t
b a s is ,
in
order
to
fill
u n u sed
c a p a c ity .
T h is
prop osal
in c lu d e s
fu n d s
to
a l l o w t h e D e p a r tm e n t o f H e a lt h and
Human S e r v i c e s t o p a y f o r s u c h s e r v i c e s b y c o n t r a c t i n 1 9 8 2 w h i l e
s e e k in g a rra n g e m e n ts f o r in d ig e n t c a r e w ith o t h e r
u n d e r -u tiliz e d
h o s p it a ls in a ffe c t e d a r e a s .
T he
A d m in is tr a tio n
w ill
seek
a $39 m illio n r e s c i s s i o n o f 1981
f u n d i n g t o b e g i n p h a s i n g o u t t h e h o s p i t a l s and c l i n i c s t h i s y e a r .
F o r 1 9 8 2 , a $ 1 1 0 m i l l i o n r e d u c t i o n fr o m c u r r e n t r e q u i r e m e n t s w i l l
be so u g h t.
U nder t h i s s c h e d u le , t h e e n t i r e s y s te m w i l l e i t h e r b e
c l o s e d o r tu r n e d o v e r t o l o c a l c o m m u n itie s t h a t w is h t o
m a in ta in




6 -1 4

th e
fa c ilitie s
by
th e
p e r i o d w i l l b e m ore t h a n

end
o f 1982.
$900 m illio n .

The p r o p o s a l
fu n d in g :

to

is

e x p e c te d

r e s u lt

1961
C u rren t b a s e :
B udget a u t h o r i t y .. . .
O u t l a y s ...................................
P o lic y r e d u c tio n :
B udget a u t h o r i t y .. . .
O u t l a y s ...................................
P roposed b u d g e t:
B udget a u t h o r i t y . ...
O u t l a y s ...................................




in

S a v in g s

th e

over

fo llo w in g

(in m illio n s
1982
1983

th e

1 9 8 1 -8 6

changes

o f d o lla r s )
1984
1985

in

19$6

157
157

171
171

183
183

194
194

205
205

215
215

-3 9
-3 9

-1 1 0
-1 1 0

-1 8 3
-1 8 3

-1 9 4
-1 9 4

-2 0 5
-2 0 5

-2 1 5
-2 1 5

118
118

61
61

-----------

-----------

-----------

—
- —

6 -1 5

H e a lth

and

BETTER TARGETING OF FEDERAL SU BSID IE S
HEALTH PROFESSIONS EDUCATION

H um an

S e r v ic e s

FOR

As p a r t o f i t s p la n s
fo r
b e tte r
ta r g e tin g
th e
a llo c a tio n
of
F ed eral
fu n d s ,
th e
A d m in is tr a tio n
w ill
p rop ose
t o end la r g e
g e n e r a l s u b s i d i e s f o r t h e t r a i n i n g o f p h y s i c i a n s and o t h e r h e a l t h
p r o fe s s io n a ls .
S u ch p r o g r a m s a r e no l o n g e r n e c e s s a r y i n l i g h t o f
th e
g r o w in g
p r o je c te d
s u p p ly
of
m ost
h e a lth
p r o fe s s io n a ls .
In ste a d ,
F ederal
p r o g r a m s w i l l b e d i r e c t l y t a r g e t e d on t r a i n i n g
needs o f n a tio n a l p r i o r i t y .
D u r in g
th e
1 9 6 0 's
and
th e
1 9 7 0 's ,
th e
s u p p ly
of
h e a lth
p r o fe s s io n a ls
in c r e a s e d
d r a m a tic a lly ,
p a r tly
as
a
r e s u lt o f
F e d e r a l s u b s id ie s o f abou t 518 b i l l i o n .
D u r in g t h e
1 9 7 0 's ,
th e
annual
n u m ber
of
g ra d u a te s
fr o m
m e d i c a l s c h o o l s d o u b l e d fr o m
8 ,0 0 0 t o n e a r ly 1 6 ,0 0 0 .
T o d a y , t h e N a t i o n a s a w h o le h a s r e a c h e d
o r e x c e e d e d th e e s tim a te d r e q u ir e d l e v e l o f h e a lt h
p r o fe s s io n a ls
fo r
a lm o s t
every
m a jo r
s p e c ia lty .
T he
nu m ber
of
a c tiv e
p h y s ic ia n s a lo n e i s e x p e c te d to re a ch n e a r ly 6 0 0 ,0 0 0 b y 1 9 9 0 ,
an
i n c r e a s e o f 58% b e t w e e n 1 9 7 5 and 1 9 9 0 .
The
A d m in is tr a tio n
w ill
prop ose le g is la t io n to r e fo c u s F ed era l
a i d o n a l i m i t e d num ber o f n a t i o n a l p r i o r i t y m e d i c a l s p e c i a l t i e s ,
r a th e r th a n p r o v id in g la r g e s u b s id ie s fo r
a ll
s p e c ia ltie s .
In
a d d itio n ,
s u p p o r t f o r t r a i n i n g in n o n -p h y s ic ia n s p e c i a l t i e s w i l l
b e f o c u s e d on o c c u p a t i o n s ,
such
as
n u r s in g ,
w h ere
sh o rtg a g e s
p e r s is t.
By
m o re d i r e c t l y t a r g e t i n g F e d e r a l h e a l t h p r o f e s s i o n s
t r a i n i n g s u b s i d i e s on n a t i o n a l p r i o r i t i e s , p rogram c o s t s
can
be
redu ced
by
about
40%
a n n u a lly ,
or
b y m ore t h a n $ 1 . 9 b i l l i o n
b e tw e e n 1 9 8 2 a n d 1 9 8 6 .
A t t h e sam e t i m e ,
h ig h e r -p r io r it y ,
m o re
ta rg e te d
program s
w ill
s u b s id iz e
th e
e d u c a tio n
of
h e a lth
p r o f e s s i o n a l s i n t h o s e f i e l d s w h e re t h e y a r e m o s t n e e d e d .
The p r o p o s e d c h a n g e i s
not
e x p e c te d
to
a ffe c t
th e
p r o je c te d
s u r p lu s e s
f o r t h e c o m in g d e c a d e i n n e a r l y a l l h e a l t h p r o f e s s i o n s
areas.
F e d e r a l s t u d e n t a s s i s t a n c e p rogram s in t h e D e p a rtm e n t
of
E d u c a tio n
w ill
c o n t i n u e a s s i s t i n g s t u d e n t s t o f i n a n c e t h e i r own
e d u c a tio n .
In a d d it io n , th e A d m in is tr a tio n w i l l c o n tin u e s u p p o rt
a t th e 1981 a p p r o p r ia te d l e v e l
of
$20
m illio n
fo r
a s s is ta n c e
program s
to
e n c o u r a g e m i n o r i t i e s , who a r e now u n d e r - r e p r e s e n t e d
in h e a l t h p r o f e s s i o n s f i e l d s , t o c h o o s e m e d ic in e a s a c a r e e r .
T he A d m i n i s t r a t i o n w i l l p r o p o s e
1981
a m en d m en ts
and
le g is la tio n
to carry
g e n e ra l s u b s id ie s to n a tio n a l p r io r it y
The
ta r g e tin g
e d u c a tio n
is
fu n d in g :




of
F ederal
e x p e c te d
to

s u b s id ie s
r e s u lt
in

6 -1 6

r e s c is s io n s ,
1982
budget
o u t t h e p o l i c y c h a n g e fr o m
g ra n ts.
fo r
h e a lth
p r o fe s s io n s
th e fo llo w in g ch an ges in

(in

m illio n s

o f

dolia r s )

1981
C urren t

1982

1983

1984

1985

1986

368
333

400
359

429
381

456
400

481
417

505
433

-2 1 9
-3 2

-2 8 0
-1 2 6

-3 0 9
-2 2 1

-3 3 6
-2 6 0

-3 6 1
-2 9 7

-3 8 5
-3 1 3

149
301

120
233

120
160

120
140

120
120

120
120

b ases

B udget a u t h o r i t y .. . .
O u t l a y s ...................................
P o lic y r e d u c tio n :
B udget a u t h o r i t y .. . .
P rop osed b u d g e t:
B udget a u t h o r i t y .. . .
O u t l a y s ...................................




6 -i7

H e a lth

and

H um an

S e r v ic e s

ELIMINATE UNNECESSARY FEDERAL SU B SID IE S FOR THE
DEVELOPMENT OF HEALTH MAINTENANCE ORGANIZATIONS

As p a r t o f th e e f f o r t t o e lim in a t e u n n e cessa ry F e d e r a l s u b s i d i e s ,
th e A d m in is tr a tio n w i l l p r o p o se t o p h ase o u t
th e
F ederal
gran t
and
lo a n
s u b s id y
program
to
h e a l t h m a in t e n a n c e o r g a n i z a t i o n s
(HMOs) b y t h e e n d o f
1983.
T he
A d m in is tr a tio n
b e lie v e s
th a t
a fte r
8
y e a r s o f F e d e r a l s u p p o r t t h e f e a s i b i l i t y o f HMO p r e p a i d
h e a lt h c a r e d e l i v e r y h a s b e e n a d e q u a te ly d e m o n s tr a te d ,
and
th a t
HMOs
can
be
f i n a n c i a l l y s e l f -s u p p o r t i n g i n s t i t u t i o n s d e v e lo p e d
w ith o u t c o n tin u e d F e d e r a l s u b s i d i e s .
T h e r e a r e now 2 3 5 HMOs w i t h
9 m i l l i o n m em bers l o c a t e d i n e v e r y u r b a n a r e a w i t h
a
p o p u la tio n
g re a te r
th a n
1 m i l l i o n , a n d a f f i l i a t e d w i t h 15% o f t h e N a t i o n ' s
p h y s ic ia n s .
In r e c e n t
years,
s u b s ta n tia l
a m o u n ts
of
p r iv a te
c a p i t a l h a v e b e e n p r o v i d e d f o r HMO d e v e l o p m e n t .
The
m a jo r im p e d im e n t t o f u r t h e r i n v e s t m e n t o f p r i v a t e c a p i t a l i n
HMO d e v e l o p m e n t i s n o t a d e a r t h o f F e d e r a l s u p p o r t
b u t,
ra th e r,
th e
u n n e c e s s a r ily
r e s tr ic tiv e
r e q u ir e m e n ts
fo r
F ederal
q u a lific a tio n
p r e s e n tly
fo u n d
in
th e
H e a lth
M a in te n a n c e
O r g a n iz a tio n
A c t.
In
fa c t,
a r t i f i c i a l l y h i g h m inim um b e n e f i t
r e q u ir e m e n ts and o r g a n i z a t i o n a l s ta n d a r d s
have
been
a
le a d in g
source
of
d e fa u lts
am ong
s m a l l , f e d e r a l l y s u p p o r t e d HMOs t h a t
h a v e fo u n d t h a t
th e
heavy
F ederal
r e q u ir e m e n ts
p r ic e d
th e ir
b e n e f i t p a c k a g e s o u t o f th e m a rk e t.
A m en dm en ts
w i l l b e p r o p o s e d t o t h e HMO A c t , w h ic h e x p i r e s a t t h e
en d o f t h e f i s c a l y e a r , t o re m e d y t h i s p r o b l e m .
O n c e HMOs a r e n o
lo n g e r
r e q u ir e d
to
u n d e rta k e
u n e c o n o m ic
a c tiv itie s ,
p r iv a te
c a p ita l
w i l l b e r e a d i l y a v a i l a b l e f o r HMO d e v e l o p m e n t , o b v i a t i n g
th e need fo r fu r t h e r s u b s i d i e s .
T h i s p r o p o s a l w i l l a l s o h a l t F e d e r a l l o s s e s fr o m f u r t h e r a t t e m p t s
t o s t a r t HMOs t h a t a r e n o t e c o n o m i c a l l y c o m p e t i t i v e .
The c u r r e n t
s u b s i d y p r o g r a m f o c u s e s on e n t i t i e s t h a t c o u ld n o t o b t a i n - p r i v a t e
f i n a n c i n g b e c a u s e o f t h e i r h i g h r i s k , and th e n im p o s e s
u n u s u a lly
e x te n s iv e ,
c o s tly
b e n e fit
packages
and
o th e r c o n d itio n s th a t
in h ib it
th e ir
c o m p e titiv e n e s s .
As
a
r e s u lt,
d e fa u lts
on
u n secu red
l o a n s f o r HMO o p e r a t i n g d e f i c i t s a n d r e q u i r e d i n t e r e s t
s u b s i d y p a y m e n t s w i l l e x h a u s t t h e $ 1 1 6 m i l l i o n HMO l o a n r e v o l v i n g
fu n d b y t h e e n d o f t h e y e a r a n d w i l l r e q u i r e
s u b s ta n tia l
fu tu r e
s p e n d i n g e v e n w i t h o u t a w a r d in g a n y new l o a n s .
T h is
p r o p o s a l w i l l d r o p th e C a r t e r a d m i n i s t r a t i o n ’ s s u p p le m e n ta l
re q u e st o f $17
m illio n
fo r
th e
lo a n
fu n d
and
seek
a
1981
r e s c is s io n
o f $20 m illio n .
No new g r a n t s o r l o a n s w i l l b e m a d e ,
a l t h o u g h HMOs now r e c e i v i n g g r a n t
su p p ort
w ill
be
a llo w e d
to
c o m p le te
th e ir
gran t
p e r io d .
The
program w i l l be c o m p le t e ly
p h a sed o u t b y th e end o f 1 9 8 3 .




6 -1 8

T h i s p r o p o s a l s h o u ld h a v e no s i g n i f i c a n t e f f e c t on d e v e lo p m e n t o f
e c o n o m i c a l l y v i a b l e HMOs, w h ic h c a n
be
fu n d e d
th ro u g h
p r iv a te
sou rces.
M oreover,
c o m p e titiv e
HMOs
w i l l b e m o re e f f e c t i v e l y
e n c o u r a g e d th r o u g h th e h e a lt h fin a n c in g r e fo r m p r o p o s a ls t h a t th e
A d m i n i s t r a t i o n i s d e v e lo p in g f o r l a t e r
su b m is s io n
th a n
th ro u g h
g r a n t s and lo a n s u b s i d i e s .
The
prop osal
fu n d in g :

is

e x p e c te d

to

1981
C u rren t b a s e :
Budget a u t h o r it y . . . .
P o lic y r e d u c tio n :
B udget a u t h o r i t y .. . .
P rop osed b u d g e t:
B udget a u t h o r i t y .. . •




r e s u lt

in

th e

(in m illio n s
1982
1983

fo llo w in g

changes

o f d o lla r s )
1985
1984

in

1986

73
30

59
43

63
45

66
55

69
66

72
73

-3 7
-6

-2 4
-1 8

-5 7
-2 7

-6 6
-5 0

-6 9
-6 1

-7 2
-7 3

36
24

35
25

6
18

-----5

———
5

— *—

6 -1 9

—— _

H e a lth

and

H um an

S e r v ic e s

RESTRAIN EXCESS GROWTH IN THE NATIONAL HEALTH SERVICE CORPS

A s p a r t o f i t s e f f o r t s t o red u ce m arket d i s t o r t i o n s
and
F ederal
s u b s id ie s ,
th e
A d m i n i s t r a t i o n w i l l s e e k no new s c h o l a r s h i p s f o r
t h e N a t i o n a l H e a l t h S e r v i c e C o r p s (NHSC) p r o g r a m .
T h is a c t i o n i s
i n t e n d e d t o p r e v e n t u n n e c e s s a r y p r o g r a m g r o w th a n d c o s t s
in
th e
1 9 9 0 's ,
w hen
p erson s
r e c e i v i n g new s c h o l a r s h i p s w o u ld c o m p l e t e
t h e i r t r a i n i n g and r e p o r t f o r a s s ig n m e n t a s F e d e r a l e m p lo y e e s .
T he NHSC p r o v i d e s f e d e r a l l y e m p lo y e d p h y s i c i a n s a n d o t h e r
h e a lth
p r o f e s s i o n a l s t o a r e a s c l a s s i f i e d b y t h e D ep a r tm e n t o f H e a lt h and
Human
S e r v ic e s
as
h e a l t h manpower, s h o r t a g e a r e a s .
M ost o f th e
NHSC a s s i g n e e s r e c e i v e f u l l t u i t i o n and s t i p e n d s u p p o r t w h i l e
in
m e d ic a l
sch ool
fo r
w h ic h
th e y
ow e s e r v i c e o n a y e a r - f o r - y e a r
b a s is .
S e r i o u s r e m a i n i n g p r o b le m s o f a c c e s s
to
a d e q u a te
p r im a r y
care
w ill
p r o b a b ly
b e v i r t u a l l y e l i m i n a t e d w i t h i n t h e n e x t fe w y e a r s
due t o g ro w th i n t h e N a t i o n 's s u p p ly
of
p h y s ic ia n s ,
past
NHSC
s c h o la r s h ip
c o m m it m e n t s ,
and
a
much
b e tte r
th a n
e x p e c te d
r e e n l i s t m e n t r a t e o f NHSC
a s s ig n e e s
who
have
c o m p le te d
th e ir
o b lig a tio n s .
At
m o st,
6 ,0 0 0
NHSC
a s s ig n e e s
—
to
serve
a p p r o x im a te ly 12 m i l l i o n u n d e rse rv e d p e o p le — a r e
n ecessary
to
cover
a ll
h e a lth
m anpow er
sh o rta g e
areas.
H o w e v e r , t h e NHSC
p la c e m e n t p r o g r a m i s c u r r e n t l y p r o j e c t e d t o grow
fr o m
2 ,0 6 0
in
1980
t o 9 , 0 0 0 b y 1 9 9 0 , e v e n i f new a w a r d s w e r e f r o z e n t o d a y .
In
a d d it io n , r e c e n t d a ta in d ic a te th a t p h y s ic ia n s
in
g e n e r a l,
and
p r im a r y
care
p h y s ic ia n s in p a r t ic u la r , a re v o lu n t a r ily lo c a t in g
i n s m a l l e r c o m m u n i t i e s , and t h a t s p e c i a l i s t s i n r u r a l a r e a s s p e n d
30% o r m o re o f t h e i r t i m e o n p r i m a r y c a r e .
F in a lly ,
s in c e
th e
s c h o la r s h ip
p i p e l i n e i s s o l o n g , w h a te v e r s h o r t - t e r m p r o b le m s i n
p r i m a r y c a r e a c c e s s r e m a in w o u ld n o t b e a d d r e s s e d b y new a w a r d s .
In a d d i t i o n t o t h e e x c e s s s u p p ly p r o b le m , t o t a l p r o g r a m c o s t s f o r
a s s ig n e e s o b lig a t e d by s c h o la r s h ip a re v e r y h ig h .
F ederal
co sts
now
a v e r a g e $ 1 0 0 ,0 0 0 p e r p h y s ic ia n f o r each y e a r o f s c h o l a r s h i p o b lig a te d s e r v ic e .
A l t e r n a t i v e a i d p r o g r a m s w o u ld b e
m ore
cost
e ffe c tiv e .
C o n s e q u e n tly ,
th e
A d m in is tr a tio n
p rop oses
to
e l i m i n a t e a l l new NHSC s c h o l a r s h i p a w a r d s i n 1 9 8 1
and
1982
but
w ill
a llo w
s t u d e n t s who c u r r e n t l y h a v e s c h o l a r s h i p s t o c o m p l e t e
th e ir tr a in in g .
A
1981
r e s c is s io n
of
$16
m illio n
in
fu n d s
p rop osed
fo r
new
s c h o la r s h ip s w i l l be r e q u e s te d .
F o r 1 9 8 2 and
b e y o n d , n o new s c h o l a r s h i p s w i l l b e s o u g h t .
T h ese
p r o p o s a ls
w ill
not
a d v e r s e ly
a ffe c t
h e a lth
m an p ow er
sh o rta g e
areas.
The
NHSC
p la c e m e n t
program ,
w h ic h p r o v i d e s
h e a lth p r o fe s s io n a ls fo r th e s e a re a s
is
p r o je c te d
to
c o n tin u e
g r o w i n g t h r o u g h 1 9 9 0 e v e n w i t h n o new s c h o l a r s h i p a w a r d s .




6 -2 0

The
p rop osal
fu n d in g :

is

e x p e c te d

to

1981
C u rrent b a se :
Budget a u t h o r i t y ....
O u t l a y s ...................................
P o lic y r e d u c tio n :
B udget a u t h o r i t y .. . .
P rop osed b u d g e t:
B u dget a u t h o r i t y .. . .




r e s u lt

in

th e

(in m illio n s
1982
1983

fo llo w in g

changes

o f d o lla r s )
1984
1985

in

1986

165
151

195
187

224
206

258
231

295
264

335
300

-1 6
-3

-3 1
-1 4

-4 5
-3 7

-5 4
-4 5

-6 5
-5 4

-8 0
-6 5

149
148

164
173

179
169

204
186

230
210

255
235

6 -2 1

H e a lth

P H A S IN G

OUT

FEDERAL

R E G U L A T IO N

OF THE

H EA LTH

and

H um an

CARE

S e r v ic e s

IN D U S T R Y

As p a r t o f th e g e n e r a l e f f o r t to r e s t r a in h e a lth
care
co sts
by
s tim u la tin g
c o m p e titio n
in
th e
h e a lth
care
in d u s tr y ,
th e
A d m in is tr a tio n
w ill
prop ose
p h a s in g
out
th e
F ederal
h e a lth
p la n n in g
an d p r o f e s s i o n a l s t a n d a r d s r e v i e w o r g a n i z a t i o n s (P S R O s)
p rogram s.
T he c u r r e n t h e a l t h p l a n n i n g
program
—
a d m in is te r e d
th ro u g h
213
lo c a l
h e a lth
s y s te m s a g e n c ie s and 57 S t a t e h e a l t h
p la n n in g and d e v e lo p m e n t a g e n c ie s
—
rep re se n ts
an
e ffo r t
to
im p o s e a c o m p le x n a t i o n a l h e a l t h r e g u l a t o r y p r o g r a m o n S t a t e s a n d
lo c a litie s .
I t h a s n o t p r o v e d e f f e c t i v e i n c o n t r o l l i n g c o s t s on
a n a tio n a l
b a s is ,
and
it
in h ib its
m ark et
fo r c e s
needed
to
stre n g th e n
c o m p e titio n
and
p r o v id e
le s s c o s tly s e r v ic e s .
T he
PSRO p r o g r a m — a d m i n i s t e r e d t h r o u g h
185
r e la tiv e ly
a u to n o m o u s
PSROs
of
w id e ly
v a r y in g e f f e c t i v e n e s s — r e g u la t e s h e a lth c a r e
s e r v i c e s f o r m e d ic a r e and m e d ic a id b e n e f i c i a r i e s ,
and
has
cost
t h e N a t i o n m o re t o a d m i n i s t e r t h a n i t h a s s a v e d i n r e d u c e d h e a l t h
care c o s ts .
R ecent
s tu d ie s
on
th e
e ffe c ts
of
th e
PSRO
program
by th e
C o n g r e s s io n a l B u d get O f f i c e p r o v id e c o n v in c in g e v id e n c e t h a t
th e
PSRO
r a is e s
n a tio n a l
h e a lth
care
s p e n d in g .
T he c o s t o f t h e
n a tio n w id e sy ste m o f h o s p i t a l
u tiliz a tio n
r e v ie w
o r g a n iz a tio n s
e x c e e d s th e r e s u l t i n g s a v in g s a c h ie v e d b y r e d u c t io n s i n le n g t h o f
h o s p ita l
sta y
and
lo w e r
a d m is s io n
ra te s.
E v en t h i s a n a l y s i s
f a i l s t o f a c t o r i n t h e r e a l i t y t h a t , due t o t h e p e r v e r s e
w ay
in
w h ic h
h o s p ita ls
a r e p r e s e n t l y r e im b u r s e d f o r s e r v i c e s on a c o s t
b a s is ,
cost
"s a v in g s "
a c h ie v e d
th ro u g h
lo w e r
m e d ic a r e
and
m e d ic a id
u tiliz a tio n
a r e s i m p l y p a s s e d o n t o h o s p i t a l u s e r s who
p a y t h e i r own b i l l s , o r who a r e c o v e r e d b y p r i v a t e i n s u r a n c e .
I f c o m p e titiv e fo r c e s a re to
r e s tr a in
c o sts,
fre e
e n try
in to
h e a lt h c a r e m a rk e ts i s e s s e n t i a l .
O th e r w is e , h i g h -c o s t p r o v id e r s
can
m o n o p o liz e
h e a lth
care
m a rk e ts.
T he c e r t i f i c a t e - o f - n e e d
r e v ie w p r o c e s s c o n d u c te d under th e h e a lt h p la n n in g program
is
a
sy ste m
w h ereby
h o s p i t a l s and o t h e r i n s t i t u t i o n a l p r o v i d e r s m u st
r e c e i v e a G overn m ent f r a n c h i s e b e f o r e b e g in n in g o p e r a t i o n s .
T h is
s y ste m i n h i b i t s f r e e m arket e n t r y , o f t e n
p r o p p in g
up
h ig h -c o s t
in s titu tio n s
b e h in d
a
G o v e r n m e n t -c r e a t e d
e n try
b a r r ie r .
E l i m i n a t i o n o f t h i s f r a n c h i s i n g s y s te m i s a n e c e s s a r y e le m e n t
in
t h e A d m i n i s t r a t i o n 's e f f o r t s t o p r o m o te t h e e f f e c t i v e f u n c t i o n i n g
o f p r iv a t e m arket fo r c e s in th e h e a lth c a re s e c t o r .
T he
h e a lth
p la n n in g
a n d PSRO p r o g r a m s w o u ld b e p h a s e d o u t o v e r
th e 1 9 8 1 -1 9 8 3 p e r io d , c o n s is t e n t
w ith
a
2 -y e a r
A d m in is tr a tio n
tim e ta b le
t o d e v e lo p and c a r r y o u t h e a l t h f i n a n c i n g r e fo r m s t h a t
encou rage
c o m p e titio n
in
th e
h e a lth
se cto r.
To
b e g in
th e
p h a s e -o u t , a $ 2 8 m i l l i o n r e d u c t io n in fu n d in g f o r h e a l t h p la n n in g
w ill
be
p rop osed
fo r
1 9 8 1 , and c o n t r a c t s w i l l b e re n e w e d w it h




6 -2 2

o n l y t h o s e PSROs j u d g e d m o s t e f f e c t i v e i n c o n t r o l l i n g h e a l t h c a r e
co sts.
Some t r a n s i t i o n a l f u n d i n g f o r t h e
m ost
e ffe c tiv e
PSROs
w o u ld
be
c o n t in u e d i n t o 1 9 8 3 t o a l l o w c o m p e tin g s y s te m s o f c a r e
to c o n tr a c t fo r th e ir s e r v ic e s .
The p h a s e -o u t
fu n d in g :

is

e x p e c te d

to

r e s u lt

1981
H e a lth

in

th e

fo llo w in g

(in m illio n s
1982
1983

changes

o f d o lla r s )
1984
1985

in

1986

P la n n in g

C u rren t b a s e :
Budget a u t h o r i t y ....

170
172

180
179

190
188

199
197

-2 8
-1 0

-1 0 0
-6 2

-1 6 8
-8 7

-1 8 0
-1 5 9

-1 9 0
-1 8 8

-1 9 9
-1 9 7

117
152

58
109

2
85

-----20

—
——

- —

. . .

. . .

189
186

203
199

215
212

227
223

238
234

-3 8
-3 8

P rop osed b u d g e t:
B udget a u t h o r i t y .. . .

158
171

174
171

P o lic y r e d u c tio n :
B u dget a u t h o r i t y .. . .

145
162

-1 1 9
-1 1 7

-1 3 6
-1 3 4

-2 1 5
-2 1 2

-2 2 7
-2 2 3

-2 3 8
-2 3 4

135
133

70
68

65

PSRO P r o g r a m
C u rrent

P o lic y

base:

r e d u c tio n s :

P rop osed

b u d g et:




6 -2 3

M A

H o u s in g

T E R M IN A T IO N

OF

TH E

HUD

P L A N N IN G

and

U rban

A S S IS T A N C E

D e v e lo p m e n t

PROGRAM

The P r e s i d e n t p l a n s t o en d t h e p l a n n i n g a s s i s t a n c e p r o g r a m o f t h e
D e p a r tm e n t o f H o u s i n g a n d U rb a n D e v e lo p m e n t .
T he p r i m a r y
in te n t
of
t h i s p rog ram — t o d e v e lo p s u b -n a t i o n a l p la n n in g c a p a b i l i t i e s
— h as been r e a l i z e d .
T h e r e i s no e v i d e n c e t h a t g e n e r a l p l a n n i n g
a s s i s t a n c e u n lin k e d t o p rogram im p le m e n ta tio n ,
as
in
th e
case
h ere,
is
e ffe c tiv e .
To
t h e e x t e n t t h a t S t a t e s and l o c a l i t i e s
b e n e f i t i n g fr o m t h e
program
fin d
it
w o r t h w h ile
and
of
h ig h
p r i o r i t y , th e y can p r o v id e fu n d in g , o r u se b lo c k g r a n t o r g e n e r a l
r e v e n u e s h a r i n g f u n d s f o r t h i s p u r p o s e a t t h e i r own d i s c r e t i o n .
To
a c h ie v e t h i s p o l i c y c h a n g e , th e P r e s id e n t w i l l p r o p o se
r e s c i s s i o n o f a l l a v a ila b le b u d g e ta ry r e s o u r c e s (e s tim a te d
$ 3 3 .7 5
m illio n )
a n d s e e k an am endm ent t o t h e 1 9 8 2 C a r t e r
in o r d e r n o t t o r e q u e s t 1 9 8 2 fu n d in g f o r t h i s p r o g r a m .
T h is p r o p o s a l
fu n d in g :

is

e x p e c te d

to

r e s u lt




th e

fo llo w in g

(in m illio n s
1982
1983

1981
C u rren t b a s e :
B udget a u t h o r i t y . ...
O u t l a y s ... .. .. ..........................
P o lic y r e d u c tio n :
B udget a u t h o r i t y . ...
O u t l a y s ...................................
P roposed b u d g e t:
Budget a u t h o r i t y . ...
O u t l a y s ...................................

in

a 1981
to
be
budget

changes

o f d o lla r s )
1984
1985

in

1986

34
40

37
35

39
36

42
39

44
41

46
44

-3 4
-3

-3 7
-2 6

-3 9
-3 6

-4 2
-3 9

-4 4
-4 1

-4 6
-4 4

------

------

37

9

-----------

-----——

____
———

——
—

6 -2 4

H o u s in g

T E R M IN A T IO N

OF

TH E

and

R E H A B IL IT A T IO N

U rban

LO AN

D e v e lo p m e n t

FUND

The P r e s i d e n t p la n s t o a b o l i s h th e r e h a b i l i t a t i o n
lo a n
fu n d
of
th e
D e p a r tm e n t
of
H o u s in g
and
U rb a n
D e v e lo p m e n t.
T h i s fu n d
u n n e c e s s a r ily
d u p lic a te s
th e
r e h a b ilita tio n
e ffo r ts
of
th e
c o m m u n ity
d e v e lo p m e n t
b lo c k
gran t
(CDBG)
program .
CDBG
r e c i p i e n t s a n n u a l l y u s e a b o u t 30% o f t h e i r b l o c k g r a n t f u n d s
fo r
r e h a b ilita tio n
in
any
g iv e n
year.
In 198 1 a b o u t $ 1 .1 b i l l i o n
fr o m CDBG a p p r o p r i a t i o n s w i l l b e
u sed
fo r
r e h a b ilita tio n .
By
c o n tra st,
th e
r e h a b ilita tio n
lo a n
f u n d w o u ld h a v e f u n d e d o n l y
$ 2 0 0 m i ll i o n o f r e h a b i li t a t i o n in 1 9 8 1 .
F u r t h e r m o r e , C D B G -fu n d e d
r e h a b i l i t a t i o n i s m ore f l e x i b l e t h a n r e h a b i l i t a t i o n
th ro u g h
th e
fu n d
s in c e
C D B G -fu n d e d
r e h a b ilita tio n
can
m ake u s e o f d i r e c t
g r a n t s , w h i c h c a n r e a c h v e r y l o w - i n c o m e r e c i p i e n t s who w o u ld
not
be
e lig ib le
fo r
lo a n s ,
in te r e s t
s u b s id ie s ,
or
lo a n s .
By
c o n t r a s t , t h e r e h a b i l i t a t i o n l o a n fu n d p r o v i d e s o n l y l o a n s .
The
c h a n g e a l s o r e p la c e s F e d e r a l c o n t r o l w ith l o c a l d e c is i o n -m a k i n g .

To
a c h ie v e t h i s p o lic y ch an ge, th e P r e s id e n t w i l l p r o p o se a 1981
r e s c i s s i o n o f a l l a v a ila b le b u d g eta ry r e s o u r c e s (e s tim a te d to
be
$ 1 3 0 m i l l i o n ) , p l u s a l l r e p a y m e n t s fr o m p r i o r l o a n s ( e s t i m a t e d t o
be
$62 m illio n fo r 1 9 8 1 ).
I n a d d i t i o n , an am en d m en t t o t h e 1 9 8 2
C a r te r b u d g et w i l l be sou gh t so a s n o t to
requ est
1982
fu n d in g
fo r t h i s program .
T h is
p rop osal
fu n d in g :

is

e x p e c te d

to

1981
C u rrent b a s e :
B udget a u t h o r i t y .. .
O u t l a y s ................................
P o lic y r e d u c tio n :
B udget a u t h o r it y . . .
O u t l a y s ................................
P rop osed b u d g e t:
B udget a u t h o r i t y ...
O u t l a y s ................................




r e s u lt

in

th e

( in m i l l i o n s
1982
1983

fo llo w in g

changes

o f d o lla r s )
1984
1985

in

1986

130
133

130
134

134
136

138
138

140
140

142
142

-1 3 0
-6 3

-1 3 0
-1 9 1

-1 3 4
-2 1 0

-1 3 8
-2 1 1

-1 4 0
-2 1 3

-1 4 2
-2 1 4

70

-5 7

-7 4

-7 3

-7 3

-7 2

6 -2 5

H o u s in g

T E R M IN A T IO N

OF

TH E

NEIGH BORHOOD

S E L F -H E L P

and

U rban

D e v e lo p m e n t

DEVELOPM ENT

PROGRAM

T he P r e s i d e n t p l a n s t o e n d t h e n e i g h b o r h o o d s e l f - h e l p d e v e l o p m e n t
p r o g r a m o f t h e D e p a r tm e n t o f H o u s in g and U rb a n D e v e l o p m e n t .
The
n e i g h b o r h o o d s e l f - h e l p d e v e lo p m e n t p r o g r a m l a r g e l y d u p l i c a t e s t h e
e ffo r ts
of
th e
N e ig h b o r h o o d R e i n v e s t m e n t C o r p o r a t i o n , a p u b l i c
c o r p o r a t i o n , a n d c o m m u n ity d e v e lo p m e n t b l o c k g r a n t f u n d s
can
be
u sed
fo r
th e
sam e
pu rp oses
as
s e lf-h e lp
fu n d s,
w ith
th e
a d d itio n a l b e n e fit th a t c it y
o ffic ia ls
are
d ir e c tly
in v o lv e d .
G iv e n
th e
s m a ll
siz e
of
th is
program
and
th e
a lte r n a tiv e
r e s o u r c e s , a n y n e g a t i v e im p a c t s h o u ld b e m in im a l.
To a c h ie v e t h i s p o l i c y c h a n g e , th e P r e s id e n t w i l l p r o p o s e a
1981
r e s c is s io n
of
a ll
a v a ila b le
b u d g eta ry r e s o u r c e s (e s tim a te d a t
$ 8 .3 m i l l i o n ) and w i l l s e e k
an
am endm ent
to
th e
1982
C a rte r
b u d g e t s o t h a t 1 9 8 2 fu n d in g w i l l n o t b e r e q u e s t e d .
T h is
p rop osal
fu n d in g :

is

e x p e c te d

to

1981
C u rren t b a s e :
Budget a u t h o r i t y .. . .
P o lic y r e d u c tio n :
Budget a u t h o r i t y .. . .
O u t l a y s ...................................
P rop osed b u d g e t:
Budget a u t h o r it y . . . .
O u t l a y s ...................................

*

$ 5 0 0 ,0 0 0




or

r e s u lt

in

th e

(in m illio n s
1982
1983

fo llo w in g

changes

o f d o lla r s )
1984
1985

in

1986

9
15

10
9

11
10

11
11

12
11

12
12

-8
-4

-1 0
-9

-1 1
-1 0

-1 1
-1 1

-1 2
-1 1

-1 2
-1 2

1
11

-----*

-----------

-----------

le s s .

6 -2 6

———

D e p a r tm e n t

IM P R O V E D

T A R G E T IN G

OF

C O N S E R V A T IO N

o f

th e

In te r io r

E X P E N D IT U R E S

The P r e s i d e n t i s d e te r m in e d t h a t th e
In te r io r
D e p a rtm e n t
be
a
good
ste w a rd
o f th e n a t u r a l and h i s t o r i c t r e a s u r e s p r o t e c t e d b y
t h e N a t i o n a l P ark S e r v i c e .
The N a t i o n ' s p a r k s a r e n o t now
b e in g
p r o p e r ly
p ro te c te d
fo r
th e
p e o p le s ' u s e .
The G overn m en t m u st
l e a r n t o m a n a g e w h a t i t ow ns b e f o r e
it
seek s
to
a c q u ir e
m o re
la n d .
To
b r in g
th e
budget
u n d e r c o n t r o l and m ake a d d i t i o n a l
f u n d s a v a i l a b l e f o r r e s t o r a t i o n a n d im p r o v e m e n t o f
th e
n a tio n a l
park
s y s te m , th e P r e s id e n t p r o p o se s to s u b s t a n t i a l l y r e fo c u s th e
D e p a r t m e n t ’ s c o n s e r v a t i o n and p r e s e r v a t i o n p r o g r a m s .
T h is w i l l b e a c c o m p lis h e d th ro u g h
m o r a to r iu m s
on
F ederal
la n d
p u r c h a s e s a n d e l i m i n a t i o n o f t h r e e m a jo r S t a t e g r a n t p r o g r a m s an d
by
s i g n i f i c a n t l y in c r e a s in g th e r e so u r c e s a v a ila b le fo r e x i s t i n g
N a t i o n a l P ark S e r v i c e a r e a s .
L e g i s l a t i o n t o am end t h e la n d a n d w a t e r s o n s e r v a t i o n fu n d w i l l b e
s o u g h t t o a l l o w m o n i e s i n t h e fu n d t o b e u s e d f o r r e s t o r a t i o n a n d
im p r o v e m e n t o f o u r N a t i o n a l P a rk S y s t e m .
In a d d it io n , a g g r e s s iv e
exch an ge program s w i l l be i n i t i a t e d
to
rou n d
out
th e
F ederal
c o n s e r v a tio n e s t a t e .
M a jo r

changes

fo r

th e se

program s

are

as

fo llo w s :

B udget A u th o r ity
1981
P rogram
1981
L evel
R e s c is s io n
Land and W a te r C o n s e r v a t io n
Fund:
S ta te r e c r e a tio n g r a n ts .
F e d e r a l la n d a c q u i s i t i o n
and a d m i n i s t r a t i o n .. . . . .
N a t i o n a l P ark r e s t o r a t i o n
a n d i m p r o v e m e n t .......................

($ m i lli o n s )
1982
C a rte r
Budg e t

304

-1 4 5

237

-1 0 5

------

------

T o t a l ......................................

541

-2 5 0

520

150

U r b a n p a r k g r a n t s .............................
H i s t o r i c p r e s e r v a t io n fu n d ..

65
42

-3 5
-8

75
32

5

In 1 9 8 1 , $105 m illio n
w a te r
c o n s e r v a tio n




185

1982
R eagan
Budget

----------------335
------

45
105

w i l l b e p r o p o s e d f o r r e s c i s s i o n o f la n d and
fu n d
a p p r o p r ia tio n s
fo r
F ederal
la n d

6 -2 7

a c q u i s i t i o n and i n 1 9 8 2 a s i m i l a r am ou nt w i l l b e r e q u e s t e d f o r
a
m a jo r
park
r e s to r a tio n
and
im p r o v e m e n t
in itia tiv e .
T he 1 9 8 2
l e v e l f o r F e d e r a l la n d a c q u i s i t i o n w i l l be l i m i t e d t o th e
am ount
n ecessary
to
c lo s e
out
cu rren t
cou rt
a w a r d s , e m e rg e n c y la n d
a c q u i s i t i o n e f f o r t s , and
a d m in is tr a tio n .
T he
to ta l
re q u e ste d
fr o m
th e
la n d
and
w a te r
c o n s e r v a t i o n fu n d f o r b o t h t h e p a r k s
i n i t i a t i v e and la n d a c q u i s i t i o n p rog ram
in
1982
w ill
be
$150
m illio n .
P o s tp o n in g
F ederal
a c q u is itio n
w ill
a llo w
fo r
a
th o u g h tfu l
p o lic y
r e v ie w
of
e x is tin g
park
and
r e c r e a tio n
l e g i s l a t i o n , a n d im p r o v e d u t i l i z a t i o n o f l a n d e x c h a n g e s a n d S t a t e
and l o c a l e f f o r t s t o a c h i e v e c o n s e r v a t i o n g o a l s .
In
1982,
$5 m i l l i o n w i l l be r e q u e s te d t o a id th e N a t io n a l T r u s t
fo r H is to r ic
P r e s e r v a tio n .
No
changes
are
prop osed
to
th e
c u r r e n t ta x in c e n t iv e s fo r h i s t o r i c p r e s e r v a tio n , e s tim a te d to be
$ 10 0 m i ll i o n in 1 9 8 2 -

(in m illio n s
1982
1983

1981
C u rren t b a se 1 / :
Budget a u t h o r it y .
O u tla y s . .
..................
P o lic y r e d u c tio n :
B udget a u t h o r it y .
O u t l a y s ..........................
P roposed b u d g e t:
B udget a u t h o r it y .
O u t l a y s ..........................

..
..

o f d o lla r s )
1984
1985

1986

1 ,2 4 8
1 ,2 6 8

1 ,3 1 4
1 ,2 5 1

1 ,3 8 5
1 ,3 2 0

1 ,4 5 1
1 ,3 4 4

1 ,5 1 5
1 ,3 9 8

-5 7 3

..

1 ,1 6 0
1 ,2 3 4

-5 6 6
-2 7 0

-5 1 2
-2 8 6

-4 6 5
-3 6 5

-4 7 1
-3 4 9

-6 0 5
-4 0 3

587
1 ,1 4 3

682
998

802
965

920
955

980
995

910
995

1/ N a t i o n a l P a r k S e r v i c e o p e r a t i o n s an d c o n s t r u c t i o n ,
la n d
and
w a te r
c o n s e r v a tio n
fu n d ,
urban
p a r k g r a n t s , and h i s t o r i c
p r e s e r v a tio n fu n d .




6 -2 8

D e p a rtm e n t
D e p a rtm e n t

T E R M IN A T IO N
AND

O F YOUNG A D U L T

YOUTH

C O N S E R V A T IO N

C O N S E R V A T IO N
CORPS

o f
o f

Labor
th e I n t e r io r

CORPS

PROGRAMS

C o n tin u a tio n o f th e young a d u lt
c o n s e r v a tio n
corps
(Y A C C )
and
Y o u th
C o n s e r v a t i o n C o r p s (Y C C ) p r o g r a m s c a n n o t b e j u s t i f i e d i n a
t r u ly a u s te r e b u d g et.
T he
A d m in is tr a tio n
w ill
prop ose
(1 ) to
p h ase
out
th e
YACC p r o g r a m b y t h e en d o f 1 9 8 2 b y n o t e n r o l l i n g
a n y new p a r t i c i p a n t s , d e f e r r i n g som e
1981
fu n d s
to
1982;
and
(2 ) to
te r m in a te
th e
YCC
program
in
1981,
r e s c i n d i n g fu n d s
c u r r e n tly a v a ila b le .
T h e L a b o r D e p a r tm e n t YACC p r o g r a m p r o v i d e s e m p lo y m e n t
on
p u b lic
la n d s
fo r
u n e m p lo y e d
y o u t h a g e s 1 6 t o 2 3 o f a l l in c o m e l e v e l s .
I t i s one o f th e
m ost
c o s tly
and
le a s t
ta rg e te d
of
F ederal
e m p lo y m e n t
and
tr a in in g
program s fo r y o u th .
O n ly o n e - t h i r d o f
YACC p a r t i c i p a n t s a r e e c o n o m i c a l l y d i s a d v a n t a g e d —
com pared
to
m o r e t h a n 80% f o r a l l o t h e r C o m p r e h e n s iv e E m p lo y m e n t a n d T r a i n i n g
A ct
(C E T A )
y o u th
program s.
L e s s t h a n 30% o f p a r t i c i p a n t s a r e
m i n o r i t i e s — com pared t o
m o re
th a n
50%
in
th e
o th e r
y o u th
program s,
in c lu d in g
m ore
th a n
70%
in
b o th jo b c o r p s and t h e
sum m er y o u t h e m p lo y m e n t p r o g r a m .
F u rth e rm o re ,
w ith
th e
s in g le
e x c e p t i o n o f t h e m o re t a r g e t e d a n d e n t i r e l y r e s i d e n t i a l j o b c o r p s
tr a in in g
p r o g r a m , i t i s t h e m o s t e x p e n s i v e CETA p r o g r a m p e r y e a r
o f s e r v ic e .
B ecau se o f
th e se
h ig h
c o sts
and
poor
ta r g e tin g ,
fo r
every
$ 3 0 5 ,0 0 0
th e
YACC
program s p e n d s , i t p r o v id e s o n ly on e y e a r o f
s e r v i c e t o a lo w e r -in c o m e b l a c k y o u t h .
T h ese
y o u th
e x p e r ie n c e
th e
h ig h e s t
ra te s
of
u n e m p lo y m e n t i n o u r s o c i e t y a n d h a v e t h e
w o r s t f u t u r e jo b p r o s p e c ts — p r o s p e c ts t h a t a r e r a r e l y
enh an ced
by
p a r t i c i p a t i o n i n t h e YACC p r o g r a m .
By c o n t r a s t , w h e n e v e r t h e
CETA g e n e r a l y o u t h
grant
program
( YETP)
spend s
$ 3 0 5 ,0 0 0 ,
it
p r o v i d e s 2 0 y e a r s o f s e r v i c e t o lo w -in c o m e b la c k y o u t h s .
The
p rop osal
w ill
have
little
im p a c t on c u r r e n t p a r t i c i p a n t s
b e c a u s e t h e p h a s e -d o w n
s c h e d u le
w ill
not
in
gen eral
r e q u ir e
la y o ffs .
In ste a d ,
no
new
p a r tic ip a n ts
w i l l b e e n r o l l e d , and
p a r t i c i p a n t l e v e l s w i l l d e c li n e g r a d u a lly th ro u g h a t t r i t i o n .
The
i m p a c t o n t h o s e who m i g h t
have
e n r o lle d
if
th e
program
w ere
c o n tin u e d
is
a l s o e x p e c t e d t o b e m in im a l b e c a u s e t h e p ro g ra m i s
r e l a t i v e l y s m a ll — an a v e r a g e o f a b o u t 4 5 0 p a r t i c i p a n t s in
each
S ta te
in
1 9 8 0 — a n d d r a w s fe w p a r t i c i p a n t s f r o m a n y p a r t i c u l a r
grou p o f y o u th .
T here w i l l be
som e
r e d u c tio n
in
F ederal
and
S t a t e c o n s e r v a t i o n w o r k , b u t m any o f t h e a f f e c t e d p r o j e c t s a r e o f
su ch
lo w p r i o r i t y t h a t t h e y a r e u n d e r t a k e n o n l y b e c a u s e t h e f r e e
l a b o r p r o v i d e d b y YACC p a r t i c i p a n t s i s a v a i l a b l e .




6 -2 9

To a c h i e v e t h e YACC p h a s e -d o w n ,
th e
P r e s id e n t
w ill
d e fe r
$58
m illio n
of
1981
budget a u th o r ity to 1 9 8 2 .
T h e se fu n d s w i l l b e
s u f f i c i e n t t o fin a n c e p h a s e -o u t a c t i v i t i e s in 1 9 8 2 , so no
budget
a u th o r ity
fo r
YACC i n 1 9 8 2 i s r e q u i r e d o r r e q u e s t e d .
The L a b o r
D e p a r tm e n t h a s a l r e a d y a d v i s e d t h e D e p a r t m e n t s o f A g r i c u l t u r e and
th e I n t e r i o r — and
th ro u g h
th em ,
S ta te
g ra n tee s
—
of
th e
te r m in a tio n
d e c is io n .
O r d e r l y p l a n n i n g f o r t h e p h a s e - o u t i s now
u n derw ay.
The I n t e r i o r D e p a r tm e n t YCC p r o g r a m p r o v i d e s summer e m p lo y m e n t o n
p u b l i c la n d s and e n v ir o n m e n t a l t r a i n i n g f o r y o u th a g e s 1 5
to
18
of
a ll
in c o m e
le v e ls .
I t i s e s s e n t i a l l y a summer YACC p r o g r a m
f o r so m ew h a t y o u n g e r y o u t h .
The
te r m in a tio n
w ill
be
e ffe c te d
th ro u g h
a r e s c i s s i o n o f $ 5 6 m i l l i o n i n 1 9 8 1 b u d g e t a u t h o r i t y an d
th ro u g h a $60 m i lli o n
r e d u c tio n
in
th e
1982
budget
fo r
th e
I n t e r i o r D e p a rtm e n t.
T h i s c h a n g e i s p r o p o s e d b e c a u s e , l i k e YACC,
YCC i s b o t h c o s t l y and p o o r l y t a r g e t e d , and t h e w o rk a c c o m p l i s h e d
i s o f lo w p r i o r i t y .
T he
p rop osal
fu n d in g :

is

e x p e c te d

to

r e s u lt

*
$58
d e fe r r e d .

m illio n

th e

(in m illio n s
1982
1983

1981
C u rren t b a s e :
B udget a u t h o r i t y ..
O u t l a y s ..............................
P o lic y r e d u c tio n s
Budget a u t h o r i t y ..
O u t l a y s .............................
P roposed b u d g e t:
B udget a u t h o r i t y ..
O u t l a y s ..............................

in

fo llo w in g

changes

o f d o lla r s )
1984
1985

in

1986

260

310
312

316
315

322
322

329
328

335
334

-5 6

-3 1 0
-2 3 8

-3 1 6
-3 0 8

-3 2 2
-3 2 2

-3 2 9
-3 2 8

-3 3 5
-3 3 4

------

— -

74

7

-----------

204*

of

th is

in

th e

YACC

program

-------

_—
—

------

------

w o u ld

be

NOTE:
T a b le in c lu d e s $ 6 0 m i l l i o n in b u d g e t a u t h o r i t y in th e
cu rren t
base
fo r
YCC
in
a ll years.
P o l i c y r e d u c t i o n s i n YCC
in c lu d e a 1 98 1 r e s c i s s i o n o f $56
m illio n
in
budget
a u th o r ity ,
r e s u ltin g
in 1 9 8 1 o u t la y s a v in g s o f $52 m i l l i o n , 1 9 8 2 r e d u c t io n s
o f $ 6 0 m i l l i o n i n b u d g e t a u t h o r i t y and $ 5 9
m illio n
in
o u tla y s ,
and
r e d u c tio n s
in
1 9 8 3 -1 9 8 6
of
$60
m illio n
in
b o th b u d get
a u t h o r i t y and o u t l a y s .




6 -3 0

D e p a rtm e n t

R E D U C T IO N

OF

TH E

H IG H W A Y

SAFETY

GRANTS

o f

T r a n s p o r ta tio n

PROGRAM

T o m ake t h e b e s t u s e o f h ig h w a y s a f e t y g r a n t s , t h e A d m i n i s t r a t i o n
w i l l p r o p o s e l e g i s l a t i o n t o r e s t r i c t e l i g i b i l i t y t o program s th a t
h a v e b e e n s u c c e s s f u l in
p r o m o tin g
h ig h w a y
s a fe ty
and
are
an
a p p r o p r ia te
F ederal
fu n c tio n .
The
le g is la tio n
w ill
a ls o
e l i m i n a t e fu n d in g t o S t a t e s f o r th e e n fo r c e m e n t o f
th e
55
m ile
p e r h o u r sp eed l i m i t .
The
F ederal
c o n tr ib u tio n
t o t o t a l h ig h w a y s a f e t y f u n d i n g i s s o
s m a l l ( 2 % - 3 % ) t h a t t h e F e d e r a l G o v e rn m e n t h a s h a d
little
im p a c t
on
w hat
S ta te
and
lo c a l
g o v e rn m e n ts
a c tu a lly d o.
A G en eral
A c c o u n t i n g O f f i c e (GAO)
stu d y
of
th e
F ederal
h ig h w a y
sa fe ty
g ra n ts
program
c o n c lu d e d
th a t
t h e r e i s no e v i d e n c e t h a t t h e s e
g r a n t s r e d u c e h ig h w a y f a t a l i t i e s .
F in a lly , s e v e r a l
w e ste rn
and
m id w e s te r n
S ta te s
are
opp osed
t o m a n d a to ry e n fo r c e m e n t o f th e
m axim um n a t i o n a l s p e e d l i m i t ( 5 5 m i l e s p e r h o u r ) .
T h e new
le g is la tio n
w o u ld :
(1 ) r e q u ir e
g ra n te e s
to
channel
r e s o u r c e s i n t o e f f e c t i v e t r a f f i c program s su ch a s a lc o h o l s a f e t y ,
em ergen cy
m e d ic a l
s e r v i c e s t r a i n i n g , p o li c e t r a f f i c e n fo r c e m e n t
s e r v ic e s ,
and
th e
c o lle c tio n
of
tr a ffic
a c c id e n t
d a ta ;
(2 ) e lim in a te
th e
e lig ib ility
of
a ll
o t h e r p r e v i o u s l y fu n d e d
p ro g ra m a r e a s in c lu d in g d r i v e r /p e d e s t r i a n b e h a v io r
research
and
h i g h w a y s a f e t y s t r u c t u r a l im p r o v e m e n t s .
T h is
p rop osal
s h o u l d p r o d u c e b u d g e t s a v i n g s o f $ 1 0 0 —1 6 0 m i l l i o n
p e r y e a r b e g i n n i n g i n 1 9 8 2 an d e x t e n d i n g t o 1 9 8 5 .
In 1 9 8 2 ,
th is
change
w ill
be
a c h i e v e d b y a m e n d in g t h e c u r r e n t l e g i s l a t i o n t o
e x c lu d e l e s s s u c c e s s f u l p ro g ra m s.
T he
prop osed
r e d u c tio n
w ill
c o n tin u e
th e
F ederal
r o le
in
h ig h w a y
s a fe ty
w h ere
it
is
a p p r o p r i a t e and h a s p r o v e n m o st e f f e c t i v e .

1981
C u rrent b a s e :
Budget a u th o r ity
O u t l a y s ........................
P o lic y r e d u c tio n :
Budget a u th o r ity
O u t l a y s . ..................
P roposed b u d g e t:
Budget a u th o r ity
O u t l a y s ........................




(in m illio n s
1982
1983

o f d o lla r s )
1984
1985

1986

264
200

244
210

202
218

215
229

239
237

255
244

------

-1 6 7
-1 6

-1 2 5
-1 1 2

-1 3 8
-1 3 8

-1 6 2
-1 5 0

-1 7 8
-1 6 3

264
200

77
194

77
106

77
91

77
87

77
81

6 -3 1

R E D U C IN G

C O R P O R A T IO N

FOR

P U B L IC

B R O A D C A S T IN G

(C P B )

F U N D IN G

The A d m i n i s t r a t i o n w i l l p r o p o s e a 25 p e r c e n t
r e d u c tio n
in
1982
fu n d s
fo r
th e
C o r p o r a t io n f o r P u b lic B r o a d c a s t in g .
CPB i s t h e
p r im a r y v e h i c l e f o r p r o v i d i n g F e d e r a l f i n a n c i a l a s s i s t a n c e t o t h e
2 17 r a d io and 1 7 0 t e l e v i s i o n s t a t i o n s t h a t c u r r e n t l y com p ose
th e
n o n -c o m m e r c i a l
b r o a d c a s tin g
sy ste m .
T he
r e d u c tio n s
w ill
be
p r i m a r i l y d i r e c t e d a t C P B 's
a d m in is tr a tiv e
co sts
and
n a tio n a l
program
p r o d u c tio n
w h i l e CPB s u p p o r t f o r l o c a l s t a t i o n s w i l l b e
m a in ta in e d a t a s h ig h a l e v e l a s p o s s i b l e .
N o n -c o m m e r c i a l s t a t i o n s s h o u l d d e t e r m i n e t h e n e e d f o r a n d t y p e o f
p rogram s th e y r e q u ir e and fin a n c e t h e i r
own
p r o d u c tio n s .
T h is
p a tte rn
o f r e d u c t i o n s w i l l p r o v id e a o p p o r t u n it y f o r p r i v a t e and
c o r p o r a te d o n a tio n s t o p la y a g r e a te r
r o le
in
fin a n c in g
lo c a l
p u b l i c t e l e v i s i o n and a llo w F e d e r a l su p p o r t f o r l o c a l s t a t i o n s t o
b e m a in ta in e d .
T h e C P B 's e f f o r t s t o s t i m u l a t e p r o g r a m p r o d u c t i o n a t t h e n a t i o n a l
le v e l
have
been
o f q u e s tio n a b le v a lu e .
W h i l e som e m e r i t o r i o u s
p r o g r a m m in g
has
r e s u lte d
fr o m
th e
C P B 's
e ffo r t,
h ig h
u n it
p r o d u c tio n
c o sts
have
p la g u e d
many
p r o je c ts .
W ith
n o ta b le
e x c e p tio n s ,
program
d e v e lo p m e n t
can
be
a c h ie v e d
much
m o re
e ffe c tiv e ly
—
and
at
a
fa r
lo w e r
c o s t — a t th e l o c a l and
r e g io n a l l e v e l .
A d d i t i o n a l r e d u c t i o n s w i l l b e made i n 1 9 8 3 a n d 1 9 8 4
budget
a u th o r ity
and
o u tla y s le v e l o u t a t $100 m
and 1 9 8 6 .
By r e d u c in g th e F e d e r a l c o n t r i b u t i o n t o
m anner, $ 3 7 7 m i l l i o n w i l l b e sa v e d o v e r th e n e x t f i v

1981
C u rren t b a s e :
Budget a u t h o r i t y . ...
O u t l a y s ...................................
P o lic y r e d u c tio n :
Budget a u t h o r i t y . . . .
O u t l a y s ...................................
P roposed b u d g e t:
B udget a u t h o r i t y . . . .
O u t l a y s ...................................




(in m illio n s
1982
1983

so
th a t
illio n in
CPB
in
e years.

o f d o lla r s )
1985
1984

CPB
1985
th is

1986

162
162

172
172

172
172

183
183

198
198

211
211

- —
------

-4 3
-4 3

-5 2
-5 2

-7 3
-7 3

-9 8
-9 8

-1 1 1
-1 1 1

162
162

129
129

120
120

110
110

100
100

100
100

6 -3 2

Funds

A p p r o p r ia te d

REDUCTIONS IN FOREIGN DEVELOPMENT A ID

to

th e

P r e s id e n t

PROGRAMS

T h e A d m i n i s t r a t i o n w i l l p r o p o s e a 26% r e d u c t i o n f r o m t h e
curren t
1982
budget
requ est
fo r
fo r e ig n
d e v e lo p m e n t
a id and f u r t h e r
r e d u c t io n s d u r in g 1 9 8 3 -8 6 .
T h is a c t io n w i l l h a l t th e v e r y
r a p id
g ro w th
re q u e ste d
fo r
d e v e lo p m e n t a i d i n t h e C a r t e r b u d g e t , f o r
e x a m p l e 33% i n 1 9 8 2 .
I t i s in te n d e d
to
assu re
th a t
th e
m ost
c r itic a l
U .S .
fo r e ig n p o lic y o b je c t iv e s are se rv ed e f f e c t i v e l y ,
b u t a t m uch l e s s c o s t , b y e l i m i n a t i n g lo w p r i o r i t y a c t i v i t i e s .
The a g e n c ie s
and
program s
a ffe c te d
by
th e
prop osal
in c lu d e
c o n tr ib u tio n s
t o t h e m u l t i l a t e r a l d e v e lo p m e n t b a n k s (s u c h a s t h e
W o r ld
B a n k );
p a y m e n ts
to
th e
U n ite d
N a tio n s
and
o th e r
i n t e r n a t i o n a l o r g a n iz a t io n p ro g ra m s; th e A gen cy f o r I n t e r n a t i o n a l
D e v e lo p m e n t;
fo o d
a id
s h ip m e n ts
u n d e r P u b l i c Law 4 8 0 ; a n d t h e
P eace C o rp s.
A l l e x i s t i n g i n t e r n a t i o n a l c o m m itm e n ts w i l l b e m e t ;
how ever,
so m e
p a y m e n ts
to
th e
U .N .
and
o th e r
m u ltila te r a l
p ro g ra m s w i l l be s tr e tc h e d o u t .
H u m a n ita r ia n p r o g r a m s , such a s t h o s e p r o v id in g e m e rg e n c y d i s a s t e r
r e lie f
and
r e fu g e e
fe e d in g ,
w ill
be
m a in ta in e d c l o s e t o th e
le v e ls o f recen t y ea rs.
The A ID p r o g r a m s , c u t b y
20%
in
1982,
w ill
b e r e o r ie n te d t o a ssu r e th a t th e y c le a r l y c o n t r ib u t e t o th e
a b ility o f
T h ir d
W o r ld
c o u n tr ie s
to
im p r o v e
th e ir
e c o n o m ic
p e r f o r m a n c e , r a t h e r th a n m e r e ly t r a n s f e r r i n g d o l l a r s .
F or fu tu r e c o n tr ib u tio n s to m u lt ila t e r a l i n s t i t u t i o n s , th e r e w i l l
be
a
c a r e fu l
a s s e s s m e n t o f W h e th e r th e U .S . fu n d s w i l l b e u s e d
e f f i c i e n t l y a n d how w e l l t h e i n s t i t u t i o n s a r e s e r v i n g t h e
U n ite d
S ta te s
and
t h e i n t e r n a t i o n a l c o m m u n ity .
T he r e d u c e d p r o g r a m o f
v e r y lo w i n t e r e s t lo a n s f o r e x p o r t s o f fo o d u n d e r P u b li c
Law 4 8 0
w ill
a ls o
be
e x a m in e d
in l i g h t o f th e c u r r e n t r i s i n g tr e n d in
c o m m e r c ia l a g r i c u l t u r a l e x p o r t s t o in s u r e t h a t i t i s t a r g e t e d
on
t h e h i g h e s t p r i o r i t y U .S . o b j e c t i v e s a b r o a d .
The
r e d u c tio n in th e c u rre n t 1982 a p p r o p r ia tio n s r e q u e s t w i l l be
$ 1 ,8 5 4 m i l l i o n , r i s i n g to a
cut
of
$ 3 ,1 8 7
m illio n
fr o m
1986
s p e n d in g
as
p r o je c te d
in th e C a r te r b u d g e t.
F o r e ig n a i d fu n d s
are a c tu a lly
sp en t
over
a
p e r io d
of
years
a fte r
th e y
are
a p p r o p r ia te d ;
and
as
a r e s u l t , th e n e a r -te r m s a v in g s in a c t u a l
c a sh b u d g et o u tla y s w i l l be s m a ll.
In th e p a s t t h i s c ir c u m s t a n c e
h a s b e e n u s e d a s argu m en t a g a i n s t
fo r e ig n
a id
c u tb a c k s.
C ash
b u d g e t o u t la y s a v in g s w i l l b e $ 4 0 2 m i ll i o n in 1 9 8 2 , b u t w i l l r i s e
to
$ 1 .8
b i l l i o n b y 1 9 8 6 and e v e n h i g h e r in t h e f o l l o w i n g y e a r s ,
c o n t r i b u t i n g im p o r ta n tly t o th e v i t a l lo n g -te r m e f f o r t
to
b r in g
th e F e d e r a l b u d get under c o n t r o l.
F u rth e r s p e c if ic d e t a ils
be
p r o v id e d
w hen
th e




on t h e s e
r e v is e d

6 -3 3

d e v e lo p m e n t
budget
is

a id r e d u c tio n s w i l l
tr a n s m itte d
to th e

C on gress.
ch an ges in

T he p r o p o s a l
fu n d in g :

is

e x p e c te d




r e s u lt

( in m i lli o n s
1982
1983

1981
C u rren t b a s e :
Budget a u t h o r i t y .. . .
O u t l a y s ...................................
P o lic y r e d u c tio n :
B udget a u t h o r i t y .. .
O u t l a y s ...................................
P roposed b u d g e t:
B udget a u t h o r i t y . ...

to

in

th e

fo llo w in g

Of d o lla r s )
1985
1984

1986

5 ,4 3 0
4 ,9 4 4

7 ,2 4 6
5 ,1 8 0

6 ,5 6 7
5 ,6 6 6

7 ,6 8 0
6 ,3 6 0

8 ,1 8 8
6 ,9 1 2

8 ,6 4 4
7 ,4 3 0

-6 1 6
-8 5

-1 ,8 5 4
-4 0 2

-2 0 5
-5 8 4

-2 ,5 1 3
- 1 ,0 6 3

-2 ,9 7 8
-1 ,5 2 7

-3 ,1 8 7
-1 ,8 2 7

4 ,8 1 4
4 ,8 5 9

5 ,3 9 2
4 ,7 7 8

6 ,3 6 2
5 ,0 8 2

5 ,1 6 7
5 ,2 9 7

5 ,2 1 0
5 ,3 8 5

5 ,4 5 7
5 ,6 0 3

6 -3 4

N a tio n a l

A e r o n a u tic s

and

Space

A d m in is tr a tio n

REDUCTIONS IN NATIONAL AERONAUTICS AND SPACE
ADMINISTRATION PROGRAMS

The 1 9 8 2 C a r t e r
budget
c a lle d
fo r
a
NASA
budget
of
$ 6 ,7 2 2
m illio n ,
a
21%
in c r e a s e
over
1981.
T h is
sh arp in c r e a s e i s
i n c o m p a t i b le w it h a program o f a c r o s s -t h e -b o a r d
r e s tr a in t.
The
r e v is e d
le v e l
fo r
1982,
$ 6 ,2 3 5
m illio n ,
s till
re p re se n ts a
s i g n i f i c a n t in c r e a s e
over
1981,
but
one
th a t
is
needed
to
m a in ta in
p rogress
in th e Sp ace S h u t t le program t o m eet c i v i l i a n
and c r i t i c a l d e fe n s e n e e d s .
T h is
in c r e a s e
w ill
a ls o
c o n tin u e
stro n g
core
program s
i n s p a c e s c i e n c e , s p a c e a p p l i c a t i o n s , and
a e r o n a u tic s .
But
fu n d in g
fo r
th e se
and
o th e r
n o n -s h u t tle
program s
w i l l c o n s t r a i n e d t o a n i n c r e a s e o f 2 .9 % i n l i g h t o f t h e
c u r r e n t f i s c a l a n d e c o n o m ic c r i s i s .
In
th e
area
of
sp ace
tr a n s p o r ta tio n ,
th e
d e v e lo p m e n t
and
procurem ent
of
a
fle e t
o f f o u r s p a c e s h u t t l e o r b i t e r s and t h e
o p t io n t o buy a f i f t h
o r b ite r
if
needed
w ill
be
m a in ta in e d .
R e d u c tio n s
are
lim ite d
p r im a r ily
to
s lo w e r
d e v e lo p m e n t
of
S p a c e la b ,
e lim in a tio n
of
fu n d in g
fo r
th e
s o la r
e le c tr ic
p r o p u l s i o n s y s t e m ( f o r w h ic h no a p p l i c a t i o n s h a v e b e e n a p p r o v e d ) ,
and
r e s c h e d u lin g
o f sp a ce s c ie n c e f l i g h t p r o j e c t s .
The r e d u c e d
le v e l
in
1982
w o u ld
be
$540
m illio n
above
th e
p r e v io u s ly
a p p r o p r ia te d
1981
l e v e l , a l l o f w h ic h i s n e e d e d t o c o m p l e t e t h e
S p a c e S h u t t l e d e v e l o p m e n t and make p o s s i b l e a
fu lly
o p e r a tio n a l
S h u t t le sy ste m in th e e a r ly 1 9 8 0 ’ s .
The
redu ced
b u d g e t,
w h ile
c a llin g fo r d e fe r r a l o r d e le t io n o f
s o m e new p r o j e c t s , p e r m i t s c o n t i n u a t i o n o f a v i g o r o u s p r o g r a m
of
sp ace
s c ie n c e
and ^ e x p lo r a t io n •
Su pport
i s p r o v id e d t o f u l l y
u tiliz e
sp a c e c r a ft
la u n c h e d
in
p r io r
years
th a t
are
s till
t r a n s m i t t i n g u s e f u l d a t a (e * g * » th e V o y a g e r m is s io n t o S a tu r n and
b e y o n d ).
The
budget
a llo w s f o r c o n tin u e d d e v e lo p m e n t o f t h o s e
p r o je c ts
th a t
o ffe r
th e
b road est
p o te n tia l
s c ie n tific
c o n t r ib u t io n and th a t have la r g e p a s t in v e s tm e n ts .
S p e c ific a lly ,
fu ll
s u p p o r t i s a llo w e d f o r t h e f u r t h e r d e v e lo p m e n t o f t h e s p a c e
te le s c o p e ,
a
u n iq u e
E a r th -o r b itin g
o b se rv a to ry
fo r
v ie w in g
o b je c ts
at
th e e d g e o f th e u n iv e r s e .
An o r d e r l y p r o g r e s s i o n i n
th e
e x p lo r a tio n
of
th e
p la n e ts
w ill
be
m a in ta in e d
th ro u g h
d e v e lo p m e n t
of
a p la n e t a r y p r o j e c t , su ch a s th e G a l i l e o m is s io n
to J u p ite r .
U .S . p a r t i c i p a t i o n w i l l a l s o c o n t in u e , a t a
red u ced
le v e l,
in
th e
in t e r n a t io n a l s o la r p o la r m is s io n .
H ow ever, th e
a d ju s te d
budget
a ls o
a ssu m es
d e fe r r a l
of
new
and
o n g o in g
p r o j e c t s , s u c h a s t h e gamma r a y o b s e r v a t o r y s p a c e c r a f t , t h e V e n u s
o r b itin g
im a g in g
radar
p r o je c t,
and s p a c e la b e x p e r i m e n t s , f o r
w h ic h t h e p o t e n t i a l
s c ie n tific
c o n tr ib u tio n
is
m o re
n a r r o w ly
fo c u se d
and
o n ly
r e la tiv e ly
s m a ll
p a s t in v e stm e n ts h ave b een
m ade.
The a d ju s t e d program l e v e l in 1 9 8 2 w i l l be $35 m i l l i o n , o r
6% a b o v e t h e p r e v i o u s l y a p p r o p r i a t e d l e v e l i n 1 9 8 1 .




6 -3 5

F o r s p a c e a p p l i c a t i o n s , m o s t new p r o g r a m s p r e v i o u s l y p r o p o s e d
to
be
in itia te d
in
1982
w o u ld b e d e l e t e d a n d r e d u c t i o n s w o u ld b e
made i n o n g o i n g a c t i v i t i e s , som e o f w h ic h u n n e c e s s a r i l y s u b s i d i z e
o r c o m p e te w it h t h e p r i v a t e s e c t o r .
T he p r o g r a m a t
th e
red u ced
le v e l
w o u ld
c o n tin u e
su p p ort
fo r :
r e s e a r c h on sp a c e r e m o t e s e n s i n g t e c h n iq u e s and s a t e l l i t e m i s s i o n s t h a t h a v e th e p o t e n t i a l
t o im p r o v e
our
a b ility
to
m anage
c r itic a l
E a rth
resou rces;
research
r e la te d
to
u n d e r s ta n d in g
w e a th e r
and
c lim a te ;
and
r e s e a r c h on a d v a n c e d s p a c e c o m m u n ic a tio n s
te c h n o lo g y
needed
to
in c r e a s e
th e
u s e fu l
ran ge
of
r a d io
fr e q u e n c ie s
fo r
c o m m u n ic a tio n s .
T he r e d u c e d l e v e l i n 1 9 8 2 w o u ld b e 6% a b o v e
th e
p r e v io u s ly a p p r o p r ia te d l e v e l fo r 1 9 8 1 .
For
a e r o n a u tic s ,
r e d u c tio n s
are
r e l a t e d t o e l i m i n a t i o n o f new
p r o j e c t s p r e v i o u s l y p r o p o s e d f o r 1 9 8 2 and l o w e r - p r i o r i t y r e s e a r c h
and t e c h n o l o g y b a s e a c t i v i t i e s .
T he r e d u c e d l e v e l w o u ld c o n t i n u e
lo n g
ran ge
research
e ffo r ts
needed
to
m a in ta in
th e
U .S .
te c h n o lo g ic a l
le a d
in
m ilita r y
and
c iv il
a e r o n a u tic s .
The
r e d u c e d l e v e l i n 1 9 8 2 w o u ld b e 4% a b o v e t h e 1 9 8 1 l e v e l .
R e d u c t i o n s w o u ld b e m ade i n g e n e r a l s u p p o r t a c t i v i t i e s ,
su ch
as
c o n s tr u c tio n
p r o je c ts ,
d ir e c t
NASA e n e r g y t e c h n o l o g y w o r k , a n d
te c h n o lo g y
d is s e m in a tio n
e ffo r ts
th a t
are
e ith e r
of
lo w e r p r i o r i t y o r a re r e la t e d t o r e d u c tio n s in o th e r a g e n c ie s .
The p r o p o s e d

fu n d in g

fo r

NASA i s

1981
C u rren t b a s e :
Budget a u t h o r i t y ....
O u t l a y s .......................
P o lic y r e d u c tio n :
Budget a u t h o r i t y .. . .
O u t l a y s ...................................
P roposed b u d g e t:
B udget a u t h o r i t y .. . .
O u t l a y s ...................................




as

fo llo w s :

(in m illio n s
1982
1983

o f d o lla r s )
1984
1985

1986

5 ,5 3 4
5 ,2 8 3

6 ,5 6 5
6 ,2 7 3

6 ,7 9 5
6 ,6 4 2

5 ,9 2 4
6 ,1 8 5

5 ,3 1 5
5 ,5 1 9

5 ,0 1 1
5 ,1 8 7

-7 5
-6 0

-3 3 0
-2 4 1

-2 4 8
-3 3 4

90
-8 6

390
156

200
124

5 ,4 5 9
5 ,2 2 3

6 ,2 3 5
6 ,0 3 2

6 ,5 4 7
6 ,3 0 8

6 ,0 1 4
6 ,0 9 9

5 ,7 0 5
5 ,6 7 5

5 ,2 1 1
5 ,3 1 1

6 -3 6

N a tio n a l

C on su m er

C o o p e r a tiv e

B ank

TERMINATION OP THE NATIONAL CONSUMER COOPERATIVE BANK

G iv e n t h e n eed t o a c c o m p lis h b u d g e ta r y r e d u c t i o n s by
e lim in a t in g
lo w e r -p r io r it y
p rogram s,
t h e N a t i o n a l C o n su m er C o o p e r a t i v e Bank
(N C C B ) w i l l b e e n d e d .
C o o p e r a tiv e s
in
gen eral
a lr e a d y
e n jo y
s p e c ia l
F ederal
ta x
tre a tm e n t.
T h ose t h a t p r o v id e s e r v i c e s t o
t h e i r m em b e rs e c o n o m i c a l l y an d
have
e x p e c ta tio n s
of
c o n tin u e d
good
e a r n in g s
and
stro n g
m a n a g em e n t
s h o u ld b e a b le t o o b t a i n
a d eq u a te c r e d it p r iv a t e ly .
T he u s e
of
b u d g eta ry
resou rces
to
s u b s i d i z e i n e f f i c i e n t c o o p e r a t iv e s can no lo n g e r b e j u s t i f i e d .
L o a n s c u r r e n t l y h e l d b y t h e NCCB w i l l b e s h i f t e d t o o t h e r F e d e r a l
a g e n c ie s .
C a p i t a l s t o c k i n t h e NCCB h e l d b y c o o p e r a t i v e s w i l l b e
redeem ed.
T e r m in a tio n
of
th e
NCCB
w ill
r e s u lt in b u d g e ta ry
s a v in g s o f o v e r $ 2 0 0 m i ll i o n th ro u g h 1 9 8 2 .
T h e NCCB w a s c r e a t e d i n 1 9 7 8 t o
p r o v id e
access
to
c r e d it
and
te c h n ic a l
a s s is ta n c e fo r c o o p e r a tiv e s .
T h e Bank w a s i n t e n d e d t o
m ake
"h a r d "
lo a n s
to
c r e d it-w o r th y
con su m er
c o o p e r a tiv e
o r g a n iz a tio n s .
A lth o u g h
o v e r $ 5 0 m i l l i o n had b e en a p p r o p r ia t e d
f o r i t s ' a c t i v i t i e s b y t h e end o f 1 9 8 0 , o n l y $5 m i l l i o n
in
lo a n s
had
been
d is b u r s e d
by
th e
end
of
th e
year.
W h ile le n d in g
a c t i v i t y h a s p i c k e d up t h i s y e a r , a l a r g e a m o u n t o f l o a n s a r e
to
h o u s in g
c o o p e r a tiv e s .
T h ere i s no n eed f o r y e t a n o t h e r F e d e r a l
a g e n c y t o p r o v id e h o u s in g c r e d i t .
A
se p a ra te
O ffic e
of
S e lf
H e lp
D e v e lo p m e n t
and
T e c h n ic a l
A s s is ta n c e
w as
c r e a t e d w i t h i n t h e Bank t o p r o v i d e a s s i s t a n c e i n
t h e fo rm o f lo n g -t e r m
c a p ita l
lo a n s ,
in te r e s t
s u b s id ie s ,
and
te c h n ic a l
a s s is ta n c e
to
c o o p e r a t i v e s t h a t m ay b e v i a b l e i n t h e
fu tu r e bu t th a t cannot
m eet
th e
B a n k 's
le n d in g
sta n d a rd s
at
p rese n t.
I t w as e s p e c i a l l y i n t e n d e d t o h e l p c o o p e r a t i v e s s e r v i n g
lo w -in c o m e
p erson s.
D e s p ite a p p r o p r ia tio n s o f o v e r $11 m i l l i o n
t h r o u g h 1 9 8 0 , l e s s th a n $1
m illio n
had
been
p r o v id e d
to
th e
i n t e n d e d r e c i p i e n t s b y t h e end o f t h e f i s c a l y e a r .
T h e NCCB w a s s t a f f e d w i t h 1 0 9 e m p l o y e e s a t t h e en d o f f i s c a l y e a r
1980.
L ess
th a n
o n e -th ir d
w ere e n g a g e d in e x t e n d in g lo a n s o r
p r o v i d i n g s e l f - h e l p d e v e lo p m e n t a s s i s t a n c e .
M ost w e re
u sed
fo r
"o v e r h e a d ."
The

p rop osal w ill




have

th e

fo llo w in g

6 -3 7

fu n d in g

e ffe c t:

198T
C urren t

( in m i l l i o n s
1983
1982

o f d o lla r s )
19<35
1984

1986

base:

B udget a u t h o r i t y .. . .
O u t l a y s ...................................
P o lic y r e d u c tio n :
B udget a u t h o r i t y . . . .
O u t l a y s ...................................
P rop osed b u d g e t:
B udget a u t h o r i t y .. . .
O u t l a y s ...................................




122
136

136
128

160
152

185
178

185
175

200
190

-9 1
-8 2

-1 3 6
-1 2 8

-1 6 0
-1 5 2

-1 8 5
-1 7 8

-1 8 5
-1 7 5

-2 0 0
-1 9 0

31
54

6 -3 8

—» —

~

—

———

N a tio n a l

R E D U C IN G

FEDERAL

SU P P O R T

FOR

THE

ARTS

E n d ow m en ts f o r t h e
A r t s and H u m a n itie s

AND

H U M A N IT IE S

The A d m i n i s t r a t i o n w i l l p r o p o s e r e d u c t i o n s
in
budget
fo r
th e
A r t s a n d H u m a n i t i e s E ndow m en ts o f a b o u t 5 0 % .
p l a c e m o re e m p h a s is on t h e r o l e o f p r i v a t e p h i l a n t h r o p y
a n d l o c a l s u p p o r t f o r a r t s an d c u l t u r a l a c t i v i t i e s .

a u th o r ity
T h is w i l l
and S t a t e

R e d u c t i o n s o f t h i s m a g n it u d e a r e p r e m i s e d
on
th e
con cept
th a t
F e d e r a l p o l i c y f o r a r t s and h u m a n i t i e s s u p p o r t m u s t b e c o m p l e t e l y
revam p ed .
For
to o
lo n g ,
th e
E ndow m en ts
have spread F ed eral
f i n a n c i n g i n t o an
e v e r -w id e r
ran ge
of
a r tis tic
and
lite r a r y
e n d e a v o r , p r o m o tin g th e n o t io n t h a t th e F e d e r a l G overn m en t s h o u ld
be
t h e f i n a n c i a l p a t r o n o f f i r s t r e s o r t f o r b o t h i n d i v i d u a l s an d
i n s t i t u t i o n s en gaged in a r t i s t i c
and
lite r a r y
p u r s u its .
T h is
p o lic y
has
r e s u lte d
in
a
r e d u c tio n
in
th e h i s t o r i c r o le o f
p r i v a t e i n d i v i d u a l and c o r p o r a t e
su p p ort
in
th e se
key
areas.
T h ese
r e d u c tio n s
in
F ederal
su p port
are
a f i r s t s t e p to w a rd
r e v e r s in g t h i s tr e n d .
M o r e o v e r , in t h o s e a r e a s w h ere F e d e r a l f in a n c i n g d o e s n o t
w h o lly
su p p la n t
p r iv a te
p h ila n th r o p ic
m ea n s
of
s u p p o r t , fu n d in g f o r
a r t i s t i c and l i t e r a r y
p u r s u its
is
a
r e la tiv e ly
lo w
p r io r ity
b u d get ite m .
G iv e n t h e n e e d f o r r e d u c t i o n s a c r o s s t h e f u l l r a n g e
of
F ederal
program s
th a t
m eet
m o re
b a s ic
human
n e e d s , lo w
p r i o r i t y i t e m s m u st b e a r a g r e a t e r b u r d e n i f f i s c a l r e s t r a i n t
is
t o b e a c h i e v e d in a b a la n c e d and c o m p a s s io n a t e w a y .
The
p rop osed
r e d u c tio n
w ill
be
a c h i e v e d b y a m e n d in g t h e 1 9 8 2
b u d g e t b y - $ 8 5 m i l l i o n f o r t h e A r t s Endow m ent
and
-$ 8 0
m illio n
fo r
th e
H u m a n itie s
E n d o w m en t.
A d d itio n a l r e d u c tio n s in b u d g et
a u t h o r i t y w i l l b e m ade i n 1 9 8 3 , 1 9 8 4 , 1 9 8 5 , a n d 1 9 8 6 .
T h e A r t s a n d H u m a n i t i e s E n d ow m en ts m ake g r a n t s t o
a
v a r ie ty ‘ o f
c u ltu r a l
o r g a n iz a tio n s
a n d i n s t i t u t i o n s s u c h a s m u se u m s, b a l l e t
c o m p a n ie s , u n i v e r s i t i e s , and l i b r a r i e s
In 1 9 8 1 , F e d e r a l su p p o rt
f o r t h e E n d ow m en ts t o t a l e d $ 3 1 1 m i l l i o n ,
$159
m illio n
fo r
th e
A r t s and $ 1 5 2 f o r th e H u m a n itie s .




6 -3 9

1981
N a t i o n a l Endow m ent f o r
th e H u m a n itie s :
C u rren t b a s e :
B udget a u t h o r i t y .. . •
O u t l a y s ...................................
P o lic y r e d u c tio n :
B udget a u t h o r i t y .. . .
O u t l a y s ...................................
P rop osed b u d g e t:
B udget a u t h o r i t y .. . .
O u t l a y s ...................................
N a t i o n a l Endowm ent f o r
th e A r t s :
C u rrent b a s e :
Budget a u t h o r i t y .. . .
O u t l a y s ...................................
P o lic y r e d u c tio n :
B udget a u t h o r i t y . . . .
O u t l a y s ...................................
P rop osed b u d g e t:
Budget a u t h o r i t y .. . .
O u t l a y s ...................................




(in m illio n s
1982
1983

o f d o lla r s )
1984
1985

1986

152
155

165
163

180
181

195
196

209
210

222
218

-----........

-8 0
-3 9

-9 0
-6 8

-9 8
-9 8

-1 0 7
-1 1 2

-1 1 5
-1 1 7

152
155

85
124

90
113

97
98

102
98

107
101

159
154

173
167

190
175

205
189

220
206

234
217

-----........

-8 5
-4 6

-9 6
-6 3

-1 0 5
-9 5

-1 1 5
-1 1 1

-1 2 4
-1 1 4

159
154

88
121

94
112

100
94

105
95

110
103

N a tio n a l

R E D U C T IO N S

IN

PROGRAMS

OF

TH E

N A T IO N A L

S c ie n c e

S C IE N C E

F o u n d a tio n

F O U N D A T IO N

A s p a r t o f h i s o v e r a l l p o l i c y o f r e d u c in g fu n d in g l e v e l s in o r d e r
t o h e l p r e s o l v e t h e im m e d ia t e f i s c a l
and
e c o n o m ic
c r is is ,
th e
P r e s id e n t
p l a n s t o s e l e c t i v e l y r e d u c e o r e l i m i n a t e som e N a t i o n a l
S c i e n c e F o u n d a tio n p ro g ra m s w h ile
m a in ta in in g
o n -g o in g
su p port
fo r
i t s c r i t i c a l r e s p o n s i b i l i t i e s in th e advancem ent o f s c ie n c e .
T h e p r o p o s e d b u d g e t a u t h o r i t y r e d u c t i o n s am ou n t t o $ 6 3 m i l l i o n i n
1 9 8 1 and $ 6 6 m i l l i o n i n 1 9 8 2 b e lo w th e c u r r e n t b a s e e s t i m a t e s .
The r e d u c t i o n s a r e d e s ig n e d t o p r e s e r v e th e
s u p p o r t o f r e s e a r c h in th e n a t u r a l s c ie n c e s
p rogram s t h a t a re p rop osed fo r r e d u c tio n o r

a g e n c y ' s f o c u s on i t s
and e n g i n e e r i n g .
T he
e lim in a tio n in c lu d e :

—

p ro g ra m s t h a t a r e n a r r o w ly fo c u s e d o r o f l e s s
i m m e d ia t e
p r io r ity
su ch
as
th e
2 -4
year
c o lle g e
research
in s tr u m e n ta tio n g r a n t s , th e
s m a ll
b u s in e s s
in n o v a tio n
research
program ,
and
th e
in te r g o v e r n m e n ta l
an d
i n t e r n a t i o n a l s c i e n c e p r o g r a m s ; an d

—

o t h e r p ro g ra m s in s c i e n c e and e n g i n e e r i n g e d u c a t io n
t h e b e h a v i o r a l , s o c i a l , a n d e c o n o m ic s c i e n c e s , w h ic h
l e s s c r i t i c a l t o m e e t i n g t h e g o a l s and o b j e c t i v e s o f
F o u n d a tio n .

and
are
th e

I n a d d i t i o n , a l l new p r o g r a m s p r o p o s e d i n t h e 1 9 8 2 b u d g e t , s u c h a s
u n iv e r s ity
la b o r a to r y
m o d e r n iz a tio n
g ra n ts
and
th e
2 5 -m e t e r
t e l e s c o p e w o u ld b e d e f e r r e d f o r f u t u r e c o n s i d e r a t i o n .
T h e p r o p o s e d r e d u c t i o n s w o u ld n o t a f f e c t t h e p r e v i o u s l y
prop osed
le v e l
of
su p port
fo r
b a s ic
and
a p p lie d
research
in
th e
m a th e m a tic a l
and
p h y s ic a l
s c ie n c e s ,
e n g in e e r in g ,
and
th e
a s tr o n o m ic a l,
a tm o s p h e r ic ,
e a rth ,
and
ocean
s c ie n c e s .
T h ese
program s h ave n o t been red u ced b e ca u se r e s e a r c h
in
th e
n a tu ra l
s c ie n c e s
and
e n g in e e r in g
is
of
r e l a t i v e l y h ig h im p o rta n c e t o
fu tu r e
te c h n o lo g ic a l
advancem ent
and
th e
lo n g -te r m
e c o n o m ic
h e a lth
The

of

th e

e x p e c te d




N a tio n .
change

in

fu n d in g

is

6 -4 1

as

fo llo w s :

(in

m illio n s

o f

d o lla r s )

1981
C urren t

1982

1983

1984

1985

1986

. .

1 ,0 8 3
,0 0 7

1 ,1 8 1
1 ,0 4 1

1 ,2 8 3
1 ,1 5 5

1 ,3 8 5
1 ,2 6 0

1 ,4 8 5
1 ,3 6 6

1 ,5 8 0
1 ,4 5 4

•*

-6 3
-2 6

-6 6
-1 5

-9 0
-8 1

-1 2 0
-1 0 9

-1 5 3
-1 4 1

-1 8 3
-1 5 5

. .

1 ,0 2 0
981

1 ,1 1 5
1 ,0 2 6

1 ,1 9 3
1 ,0 7 4

1 ,2 6 5
1 ,1 5 1

1 ,3 3 2
1 ,2 2 5

1 ,3 9 7
1 ,2 9 9

b ase:

B udget a u t h o r i t y .
O u t l a y s ..........................
P o lic y r e d u c tio n :
Budget a u t h o r it y .
O u t l a y s ..........................
P rop osed b u d g e t:
B udget a u t h o r it y .
O u t l a y s ..........................




6 -4 2

7.

CONSOLIDATE CATEGORICAL GRANT PROGRAMS
INTO BLOCK GRANTS

D e p a r tm e n t

o f

E d u c a tio n

CONSOLIDATING ELEMENTARY AND SECONDARY EDUCATION PROGRAMS

The A d m in is t r a t io n p r o p o s e s t o c o n s o l id a t e a l l o r p a r t o f o v e r 45
s e p a r a t e F e d e r a l and s e c o n d a r y e d u c a t i o n p r o g r a m s i n t o tw o " b l o c k
g r a n t " p r o g r a m s — on e t o th e S t a t e s and on e t o
L ocal
E d u c a tio n
A g e n c ie s
( L E A 's ) .
S u ch
b lo c k
g ra n ts
w ill s h if t c o n tro l over
e d u c a t i o n p o l i c y away fr o m t h e F e d e r a l
G o v e rn m e n t
and
back
to
S ta te
and
lo c a l
a u th o r itie s
—
w h e re i t c o n s t i t u t i o n a l l y a n d
h i s t o r i c a l l y b e lo n g s .
E x is tin g
m u ltip le
program
r e q u ir e m e n ts
are
bu rd en som e,
in fle x ib le ,
u n r e s p o n s i v e , and d u p l i c a t i v e , r e s u l t i n g in w a s t e o f
r e s o u r c e s a t a l l l e v e l s o f g o v e rn m e n t; th e b lo c k
gran t
app roach
w ill
e li m i n a t e such unneeded F e d e r a l r u l e s .
T he F e d e r a l r o l e i s
t o s u p p ly n e c e s s a r y r e s o u r c e s , n o t
to
s p e c ify
in
e x c r u c ia tin g
d e t a i l w h at m u st b e don e w it h t h e s e r e s o u r c e s .
U nder
b lo c k
g ra n ts,
t h e r e w i l l b e no r e q u i r e m e n t s f o r m a t c h i n g
f u n d s a n d n o d em an ds t h a t F e d e r a l f u n d s " s u p p l e m e n t
ra th e r
th a n
s u p p la n t"
lo c a l
fu n d in g .
T here
w ill
b e no e n d l e s s b y z a n t i n e
s q u a b b le s
over
m y r ia d
a c c o u n tin g
r e g u la tio n s
th a t
a id
b u rea u cra ts,
not
c h ild r e n .
A p p r o x im a te ly
13%
o f th e F e d e r a l
fu n d s
in
program s
to
be
c o n s o lid a te d
are
now
u sed
fo r
a d m in is tr a tiv e
exp en ses
by
S ta te
and
lo c a l
a g e n c ie s .
T h is
overh ead w ill be
d r a s tic a lly
red u ced
under
th e
c o n s o lid a tio n
p r o p o s a l.
The
LEA
b lo c k
gran t
w ill
in c lu d e
a b o u t 12 p r o g r a m s t h a t a r e
p r e s e n t l y t a r g e t e d on s t u d e n t s ju d g e d t o h a v e s p e c i a l e d u c a t i o n a l
n eed s:
th e
e c o n o m ic a lly
d is a d v a n ta g e d ,
th e
p h y s ic a lly
or
m e n ta lly
h a n d ic a p p e d ,
c h ild r e n
lim ite d
p r o fic ie n c y
in
E n g lis h ,
c h ild r e n
in
sch ool
d is tr ic ts
u n d e r g o in g
r a c ia l
d e s e g r e g a tio n ,
and
illite r a te
a d u lts .
B ecau se
m any o f t h e s e
p ro g ra m s o v e r la p s e r v i c e s t o d is a d v a n ta g e d
stu d e n ts,
th e
b lo c k
gran t
sy ste m
w i l l a l l o w l o c a l i t i e s t o e l i m i n a t e c o n f l i c t i n g and
d u p l i c a t i v e r e g u l a t i o n s and r e p o r t i n g r e q u ir e m e n t s .
T he b l o c k g r a n t t o t h e S t a t e s c o m b in e s a b o u t 35 s e p a r a t e p r o g r a m s
t h a t (a ) p r o v id e d i r e c t
e d u c a tio n a l
s e r v ic e s
fo r
h a n d ic a p p e d ,
n e g le c te d ,
a n d d e l i n q u e n t c h i l d r e n , ( b ) im p r o v e t h e s t a f f i n g a n d
s e r v ic e s o f
th e
S ta te
E d u c a tio n a l
A g e n c ie s ,
and
(c ) su p p ort
im p r o v e d
sch ool
servxces
xn
a
v a r ie ty
of
w ays
in c lu d in g
a s s is ta n c e
to
sch ool
lib r a r ie s ,
c u r r ic u lu m
d e v e lo p m e n t,
and
te c h n ic a l




a s s is ta n c e .

7 -1

N in e te e n o f th e p rog ram s t o
be
c o n s o lid a te d
are
so
s m a ll
in
fu n d in g
le v e l
and
fo c u s
th a t t h e ir a d m in is tr a tio n a s se p a r a te
c a t e g o r i c a l g r a n t s m akes
no
sen se.
P rogram s
su ch
as
m e tr ic
e d u c a tio n ,
con su m er
e d u c a tio n ,
la w -r e la t e d
e d u c a tio n ,
e th n ic
h e r ita g e
s tu d ie s ,
and
o th e rs
are
r e a lly
"m ic r o -c a t e g o r ic a l"
g r a n t s t h a t s h o u ld n o t be s e p a r a t e F e d e r a l a c t i v i t i e s .
F u rth e r,
even
at
a
l e v e l o f $ 1 0 0 m i l l i o n a y e a r , i t s h o u ld be
n o t e d , a F e d e r a l e d u c a t io n a l program
w o u ld
p r o v id e
an
average
a w a rd o f o n l y $ 6 , 2 5 0 p e r s c h o o l d i s t r i c t .
T h is i s a n o th e r r e a s o n
t o c o m b in e 21 o f t h e s e p r o g r a m s , w h ic h h a v e t o t a l f u n d i n g o f $ 1 0 0
m illio n o r le s s a y e a r , in t o th e c o n s o lid a te d b lo c k g r a n t s .
B udget
a u th o r ity
fo r
t h e " b l o c k g r a n t s " i n 1 9 8 2 w i l l b e 80% o f
t h e sum o f t h e c o m b in e d p r o g r a m s
in
1981.
T he
A d m in is tr a tio n
a n tic ip a te s
th a t
th e
red u ced
fu n d in g l e v e l s w i l l b e o f f s e t b y
m ore e f f i c i e n t m a n a g e m e n t g e n e r a t i n g fr o m t h e i n c r e a s e d
la titu d e
g iv e n t o S t a t e an d l o c a l g o v e rn m e n ts t o t a i l o r e d u c a t io n p r o g r a m s
to s u i t th e p a r t i c u l a r n eed s o f c h ild r e n in t h e i r d i s t r i c t s .
A
lis t
o f th e p rogram s
g ra n ts i s a tta c h e d .

th a t w ill




c o n s o lid a te d

(in m illio n s
1982
1983

1981
C u rren t b a s e :
Budget a u t h o r i t y .. . .
O u t l a y s ................................. .
P o lic y r e d u c tio n :
B udget a u t h o r i t y .. .
O u t l a y s .................................
P rop osed b u d g e t:
Budget a u t h o r i t y .. . .
.

be

in to

th e

o f d o lla r s )
1984
1985

b lo c k

1986

5 ,6 1 1
5 ,3 6 4

6 ,0 6 1
5 ,7 9 7

6 ,5 7 0
6 ,2 7 9

7 ,0 5 1
6 ,7 3 0

7 ,5 0 2
7 ,1 5 5

7 ,9 8 3
7 ,6 1 3

-----------

-1 ,4 9 8
-1 0 6

- 1 ,7 6 1
- 1 ,2 1 7

-1 ,9 9 8
-1 ,7 6 6

-2 ,3 6 6
-2 ,0 5 1

-2 ,6 1 7
-2 ,2 7 2

5 ,6 1 1
5 ,3 6 4

4 ,5 6 3
5 ,6 9 1

4 ,8 0 9
5 ,0 6 2

5 ,0 5 3
4 ,9 6 4

5 ,1 3 6
5 ,1 0 4

5 ,3 6 6
5 ,3 4 1

7 -2

PROGRAMS

IN C L U D E D

(B u d g e t

IN

LO C A L

a u th o r ity ;

E D U C A T IO N
in

m illio n s

AGENCY
o f

BLOCK

1981
C o n tin u in g
R e s o lu tio n
L evel

P ro g ra m
G ra n ts fo r
T itle I
T itle I
T itle ' I

GRANTS

d o lla r s )

th e D is a d v a n ta g e d
ESEA b a s i c g r a n t s f o r d i s a d v a n t a g e d ..................
ESEA S t a t e a g e n c y p r o g r a m s f o r m i g r a n t s . . .
ESEA c o n c e n t r a t i o n g r a n t s ..............................................

2 ,8 2 2 .7
2 8 8 .0
1 4 5 .0

E d u c a t i o n f o r t h e H a n d ic a p p e d ( S t a t e G r a n t s )
H a n d ic a p p e d S t a t e g r a n t p r o g r a m ....................................................
P r e s c h o o l in c e n t iv e g r a n ts f o r th e h a n d i c a p p e d ....

9 2 2 .0
2 5 .0

A d u lt E d u c a tio n
A d u lt e d u c a tio n

S t a t e s .................................................

1 2 0 .0

B i l i n g u a l E d u c a tio n
B i l i n g u a l e d u c a t i o n ......................................................................................
B i l i n g u a l v o c a t i o n a l t r a i n i n g ..........................................................

1 3 7 .9
4 .8

S c h o o l Im p r o v e m e n t
B a s i c s k i l l s . . . . . ......................................................................................
E m e r g e n c y s c h o o l a i d (3 p r o g r a m s ) .........................................

1 8 .2
2 0 4 .9




g ra n ts

to

T o t a l ..................................................................................................

7 -3

4 ,6 8 8 .5

PROGRAMS IN C L U D E D I N BLOCK G R A N TS
(B u d g e t a u t h o r i t y ; in m i l l i o n s o f

TO S T A T E S
d o lla r s )

1981
C o n tin u in g
R e s o lu tio n
L evel

P rogram
S t a t e A g en cy G r a n ts f o r th e D is a d v a n ta g e d
T i t l e I ESEA S t a t e a g e n c y p r o g r a m s f o r t h e
h a n d i c a p p e d ..........................................................................................................
T i t l e I ESEA S t a t e a g e n c y p r o g r a m s f o r n e g l e c t e d
and d i l i n q u e n t ..................................................................................................
T i t l e I ESEA S t a t e a d m i n i s t r a t i o n ..............................................
T i t l e I te c h n ic a l a s s is ta n c e c e n te rs (E v a lu a tio n ).
S u p p o rt and I n n o v a tio n
S u p p o r t and i n n o v a t i o n — i m p r o v in g l o c a l
e d u c a t i o n a l p r a c t i c e s ..............................................................................
S t r e n g t h e n i n g S t a t e e d u c a t i o n a g e n c y m a n a g e m e n t ...
S p e c i a l E d u c a tio n
S e v e r e l y h a n d i c a p p e d p r o j e c t s ..........................................................
R e g i o n a l r e s o u r c e s c e n t e r s ..................................................................
E a r l y c h i l d h o o d e d u c a t i o n .....................................................................
R e g i o n a l v o c a t i o n a l , a d u l t , and p o s t - s e c o n d a r y
p r o g r a m s ...................................................................................................................
H a n d ic a p p e d i n n o v a t i o n an d d e v e l o p m e n t ................................
S p e c i a l e d u c a t i o n p e r s o n n e l d e v e l o p m e n t .............................
G i f t e d a n d t a l e n t e d ......................................................................................

165 .0
3 7 .8
4 7 .0
8 .0

9 1 .4
5 1 .0

5 .0
1 0 .0
2 0 .0
2 .0
8 .0
5 8 .0
5 .4

E m ergency S c h o o l A id
S p e c i a l p r o j e c t s ...............................................................................................
N o n p r o f i t o r g a n i z a t i o n s ...........................................................................
E d u c a t i o n a l t e l e v i s i o n ..............................................................................
T r a i n i n g a n d a d v i s o r y s e r v i c e s (CRA I V ) .............................

8 .5
7 .5
6 .5
4 5 .7

S c h o o l L i b r a r i e s and I n s t r u c t i o n a l R e so u r c e s
S c h o o l l i b r a r i e s and i n s t r u c t i o n a l r e s o u r c e s . . . . . .

1 7 1 .0

S c h o o l Im p ro v e m en t
B a s i c s k i l l s im p r o v e m e n t ( S t a t e g r a n t s ) .............................
A r t s i n e d u c a t i o n ............................................................................................
M e t r i c e d u c a t i o n ...............................................................................................
C i t i e s i n s c h o o l s .............................................................................................
PUSH f o r e x c e l l e n c e .......................................................................................
F o l l o w - t h r o u g h .....................................................................................................
P r o f e s s i o n a l D e v e lo p m e n t
T e a c h e r c o r p s ........................................................................................................
P r e - c o l l e g e s c i e n c e t e a c h e r t r a i n i n g ......................................
B i l i n g u a l e d u c a t i o n t r a i n i n g g r a n t s .........................................
O th e r
C a r e e r e d u c a t i o n i n c e n t i v e s ................................................................
C om m u n ity s c h o o l s .............................................................................................
C o n su m er e d u c a t i o n ........................................................................ .................




7 -4

1 3 .4
1.7

1 .8
3.1

1 .0
3 9 .2

2 9 .0
2 .5
3 7 .1

1 5 .0
1 0 .0
3.6

L a w - r e l a t e d e d u c a t i o n ................................................................................
A l c o h o l a n d d r u g a b u s e e d u c a t i o n .................................................
E t h n i c h e r i t a g e s t u d i e s ...........................................................................
W o m e n 's e d u c a t i o n a l e q u i t y ..................................................................
T o t a l ........................................... .................................................................




7 -5

1*0
3 .0
3 .0
1 0 .0
9 2 2 .2

H e a lth

and

H u m an

RETURNING MANAGEMENT OF HEALTH AND SOCIAL SERVICES
TO STATES

S e r v ic e s

PROGRAMS

A s p a r t o f th e e f f o r t t o r e t u r n d e c is io n m a k in g
a u th o r ity ,
w h ere
a p p r o p r ia te ,
to
S ta te s
and l o c a l i t i e s , th e A d m in is t r a t io n w i l l
p rop o se to c o n s o lid a te th e p r e se n t c o lle c t io n o f about 40 F ed era l
c a t e g o r i c a l g r a n t s f o r h e a l t h and s o c i a l
s e r v ic e s
in to
one
or
m o re b l o c k g r a n t s t o S t a t e s .
T h rou gh
th e
years,
a
c o m p le x ,
d u p l i c a t i v e , and u n c o o r d in a te d
array
of
F ederal
h e a lth
and
s o c ia l
s e r v ic e
program s
has
d e v e lo p e d .
T h ese
program s
p r o v id e
s e r v ic e s
b a s e d on v a r y in g
c r i t e r i a i n c l u d i n g a g e , in c o m e , h e a l t h s t a t u s , d i s e a s e
ca teg o ry ,
o c c u p a tio n ,
and
r e s id e n c e .
M ost
of
t h e p r o g r a m s o v e r l a p and
d u p l i c a t e o t h e r p r o g r a m s i n s e r v i c e s p r o v id e d a n d /o r
p o p u la tio n s
served .
Some o f t h e s e p r o g r a m s a r e f o r m u la g r a n t s t o S t a t e s f o r
p r o v is io n o f s e r v ic e s
at
th e
lo c a l
le v e l,
u s u a lly
by
lo c a l
g o v e rn m en ts
or
a g e n c ie s .
O t h e r s make p r o j e c t g r a n t s o r p r o v i d e
in -k in d s e r v ic e s
or
fe d e r a lly
p a id , w ork ers
to
lo c a l
p u b lic
a g e n c ie s ,
c o m m u n i t y -b a s e d
o r g a n i z a t i o n s , and s i m i l a r n o n - p r o f i t
grou p s.
E ach p r o g r a m g e n e r a l l y h a s
its
own
se p a ra te
p la n n in g
p rocess.
A s i d e fr o m t h e c o n f u s i o n c a u s e d b y t h e t o t a l l a c k o f c o h e r e n c e i n
th e
F ederal
d e liv e r y
e ffo r t
i t s e l f , d a y t o d a y m anagem ent h a s
d e v e lo p e d i n t o a b u r e a u c r a t i c m o ra ss o f p la n n i n g , r e g u l a t i n g , and
r e p o r t i n g a t t h e F e d e r a l , S t a t e , and l o c a l l e v e l s .
T here a re 437
p a g e s o f la w a n d 1 , 2 0 0 p a g e s o f r e g u l a t i o n a l o n e f o r t h e p r o g r a m s
in c lu d e d in th e p r o p o s a l.
T h ese program s a d m in is t e r a b o u t
5 ,8 0 0
se p a ra te
g ra n ts
and
2 4 ,0 0 0 g r a n t s i t e s .
O nce a w a rd s a r e m ade,
o v e r 7 m i l l i o n man
hou rs
of
S ta te
and
lo c a l
govern m en t
and
c o m m u n ity
e f f o r t a re u se d j u s t in f i l l i n g o u t f e d e r a l l y r e q u ir e d
r e p o r ts each y e a r .
In a d d i t i o n , th e N a tio n s u p p o r ts
over
3 ,3 0 0
F ederal
e m p lo y e e s
t o a d m in is te r th e g ra n t program s p ro p o se d fo r
c o n s o lid a tio n .
T he p r o b l e m s o f c a t e g o r i c a l g r a n t p r o g r a m s a r e n o t
lim ite d
ju s t
to
th is
w a ste
and
i n e f f i c i e n c y o r t o m anagem ent d i f f i c u l t i e s .
B e ca u se o f th e fra g m e n te d n a tu r e o f th e c u r r e n t
fu n d in g
sy ste m ,
o fte n
p erson s
in
need
of
th e se
s e r v ic e s
m u st g o t o s e v e r a l
d i f f e r e n t and u n r e la t e d g r a n t e e s f o r d i f f e r e n t s e r v i c e s and
m u st
r e c e iv e
r e la te d
h e a l t h s e r v i c e s fr o m d i f f e r e n t p r o v i d e r s .
The
c u r r e n t s y s t e m 's a d m i n i s t r a t i v e
r e q u ir e m e n ts
have
r e s u lte d
in
n e a r ly
in s u r m o u n ta b le
b a r r ie r s
fo r
S t a t e s , l o c a l g o v e rn m e n ts,
c o m m u n i t i e s , a n d e v e n i n d i v i d u a l p r o v i d e r s who w i s h t o
in te g r a te
fu n d s
fr o m
a ll
gran t
program s
in to
c o m p r e h e n s iv e a s s i s t a n c e
sy ste m s.
The A d m i n i s t r a t i o n 's b l o c k g r a n t p r o p o s a l w i l l e n a b le
S ta te s
to
p la n
and
c o o r d i n a t e t h e i r own s e r v i c e p r o g r a m s , e s t a b l i s h t h e i r
own p r i o r i t i e s ,
and
e x e r c is e
e ffe c tiv e
program
c o n tro l
over




7 -6

r e s o u r c e s p r o v id e d t o l o c a l i t i e s
and
n o n -p r o fit
o r g a n iz a tio n s .
T h is
app roach
w o u ld
red u ce
th e
m u ltip lic ity
of
r u le s
and
r e g u l a t i o n s (a n d , h e n ce F e d e r a l d i r e c t i o n )
under
w h ic h
s e r v ic e
a g e n c ie s
c u r r e n tly
o p e ra te .
S ta te s
w o u ld
th u s
have g re a te r
f l e x i b i l i t y — as w e ll as g r e a te r
r e s p o n s ib ility
fo r
r e s u l t s — in
p r o v id in g
needed
s e r v ic e s
to
th e ir
p o p u la tio n s .
O v e r la p p in g
f u n d i n g fr o m d i f f e r e n t p r o g r a m s f o r t h e sam e
s e r v ic e s
c o u ld
be
e lim in a te d .
S t a t e s c o u ld s e l e c t th e s e r v i c e d e l i v e r y a g e n c y b e s t
a b le
t o p r o v i d e c e r t a i n s e r v i c e s t h a t a r e now p r o v i d e d b y d i r e c t
F ed eral g ra n tee s.
T he
o v e r a ll
r e s u lt
w o u ld
stre n g th e n
S ta te
g o v e rn m e n ts
and
p r o v id e
p u b lic ly -fin a n c e d
s e r v ic e s
m ore
e f f e c t i v e l y and a t lo w e r c o s t s t o t h o s e i n n e e d .
L e g i s l a t i o n w i l l be p ro p o se d as soon a s p o s s i b le t o c a r r y o u t th e
A d m i n i s t r a t i o n 's p r o p o s a l, e f f e c t i v e in
O cto b er
of
th is
year.
The
p rop osed
fu n d in g
l e v e l f o r 1 9 8 2 i s 75% o f t h e 1 9 8 1 c u r r e n t
b a s e o r $ 6 .8 b i l l i o n .
B e c a u s e t h e new
b lo c k
gran t
le g is la tio n
w o u ld
a llo w
s ig n ific a n t
sa v in g s
in
p r o g r a m o v e r h e a d a n d m o re
e f f i c i e n t s e r v i c e d e l i v e r y due t o th e e li m i n a t i o n o f
o v e r la p p in g
s e r v ic e
r e s p o n s i b i l i t i e s , t h i s fu n d in g ch a n g e need n o t r e s u l t in
a r e d u c tio n o f s e r v ic e s .

___________ ( i n m i l l i o n s
1981
1982
1983
C u rrent b a se :
B udget a u t h o r i t y .. . .
O u t l a y s ...................................
P o lic y r e d u c tio n :
B udget a u t h o r i t y ....
O u t l a y s ...................................
P rop osed b u d g e t:
B udget a u t h o r i t y ....
O u t l a y s ...................................




o f d o l l a r s ) _____________
1984
1985
1986

9 ,4 9 1
9 ,3 3 4

9 ,9 4 2
9 ,7 8 7

1 0 ,3 2 6
1 0 ,1 4 1

1 0 ,6 5 7
1 0 ,4 7 0

1 0 ,8 7 8
1 0 ,7 2 3

----------- 2 , 6 9 7
----------- 2 , 5 4 0

-3 ,1 4 8
-2 ,9 9 3

-3 ,5 3 2
-3 ,3 4 7

-3 ,8 6 3
-3 ,6 7 6

-4 ,0 8 4
-3 ,9 2 9

6 ,7 9 4
6 .7 9 4

6 ,7 9 4
6 ,7 9 4

6 ,7 9 4
6 ,7 9 4

9 .0 5 9
8 .9 8 3

9 .0 5 9
8 .9 8 3

6 ,7 9 4
6 ,7 9 4

7 -7

6 ,7 9 4
6 ,7 9 4




8.

REDUCE OVERHEAD AND PERSONNEL COSTS
OF THE FEDERAL GOVERNMENT

D e p a r tm e n t

of

D e fe n s e -M ilita r y

DEPARTMENT OF DEFENSE-M ILITARY

T h e g ro w th o f S o v i e t m i l i t a r y pow er o v e r th e c o u r s e o f
th e
p ast
decade
th re a te n s
to
u n d e r m in e
our
a b ility
t o d e t e r a n a rm ed
a t t a c k on o u r
in te r e s ts
d u r in g
th e
1 9 8 0 's .
S in c e
th e
la te
1960’s,
th e
S o v ie ts
have
in v e s te d
$ 3 0 0 b i l l i o n m ore i n t h e i r
d e f e n s e e f f o r t th a n h a s th e U n ite d S t a t e s .
T h is
in v e s tm e n t
has
p r o v i d e d t h e S o v i e t U n io n w i t h a m i l i t a r i l y s i g n i f i c a n t n u m e r i c a l
a d v a n ta g e
in
m ost
m a jo r c a t e g o r i e s o f w e a p o n s y s t e m s i n c l u d i n g
i n t e r c o n t i n e n t a l b a l l i s t i c m i s s i l e s , s u b m a r in e -la u n c h e d b a l l i s t i c
m is s ile s , c r u is e m is s ile s , t a c t ic a l a ir c r a f t ,
arm ored
v e h ic le s ,
a ir
d e fe n s e
sy ste m s,
and
a r tille r y .
The
con seq u en ces
of
p e r m i t t i n g a g r o w in g d i v e r g e n c e
of
m ilit a r y
pow er
to
p e r s is t
d u r in g
t h e 1 9 8 0 ' s a r e s o f r a u g h t w i t h d a n g e r t h a t a m a jo r e f f o r t
t o im p r o v e o u r d e f e n s e p o s t u r e m u s t
be
made
over
th e
next
5
years.
T here
is
no
need
t o m a tc h t h e n u m e r i c a l d i m e n s i o n o f
S o v i e t f o r c e s , b u t t h e f o r c e s we p r o c u r e m u s t b e f u l l y c a p a b l e o f
c o p i n g w i t h t h e t h r e a t we w i l l f a c e d u r i n g t h e c o m in g d e c a d e .
S u b s t a n t i a l g ro w th i n t h e s h a r e o f b u d g e t
resou rces
d e v o te d
to
n a t i o n a l d e f e n s e i s p r o v id e d t o im p r o v e and s u s t a i n t h e r e a d i n e s s
o f U . S . f o r c e s arid t o i n c r e a s e t h e i r a b i l i t y t o d e t e r a n d , s h o u l d
d e te rre n ce
fa il,
to
p r e v a il
in re sp o n se t o a g g r e s s io n a g a in s t
U .S . i n t e r e s t s .
The d e f e n s e b u d g e t h a s b e e n r e v ie w e d c l o s e l y
to
a c h ie v e
cost
s a v in g s .
P art
of
th e
d e fe n s e
g ro w th
w ill be
f i n a n c e d b y t h e s a v i n g s t h a t r e s u l t fr o m i n c r e a s e d e f f i c i e n c y a n d
r e d u c t i o n s in t r a v e l and o t h e r m a r g in a l a c t i v i t i e s .
P r o p o s e d r e d u c t i o n s *— T h e
r e d u c tio n s
p rop osed
by
th e
A d m in is tr a tio n
w ill
grow
t o m o re t h a n $ 7 b i l l i o n i n o u t l a y s b y
1986.
S a v in g s i n c a t e g o r i e s o t h e r th a n p a y o f
$ 0 .8
b illio n
in
budget
a u th o r ity
and
$ 0 .5
b illio n
in
o u tla y s
in
1982
are
e s tim a te d
to
r e s u lt
fr o m
a
v a r ie ty
of
e ffic ie n c ie s .
The
d e p a rtm en t
o f d e fe n s e i n s t a l l a t i o n and l o g i s t i c s s t r u c t u r e c o s t s
abou t $40 b i lli o n per year to o p e ra te .
W h ile p r o g r e s s
has
been
m ade
over
th e
years
in
c o n s o lid a tin g
th is
str u c tu r e
to
a c c o m m o d a t e o u r m o d e rn m i l i t a r y f o r c e s , m o re c a n b e d o n e .
Up
to
5%
per
year
in
fa c ility
c o sts
c o u ld
be
saved
a fte r
fu ll
im p le m e n t a t io n o f a p rogram i n v o l v i n g :
___

r e a l i g n m e n t s t h a t w o u ld
s t r u c t u r e ; and

___

in c r e a s e d
u se
of
c o n tra c tu a l
se r v ic e s
in
p la c e
of
in -h o u s e
G overn m en t
a c tiv itie s ,
w h erev er e c o n o m ic a lly
ju s tifie d .




8 -1

red u ce

th e

s iz e

of

th e

o v e r a ll

R e d u c tio n s

in

tra v e l

and

c o n s u lta n ts

w ill

a ls o

be

a c h ie v e d .

A v a r i e t y o f m a n a g em e n t im p r o v e m e n t s i s
to
be
a p p lie d
in
th e
a c q u is itio n
area.
T h ese
in c lu d e :
m u lti-y e a r
p ro c u r e m e n ts
p e r m i t t i n g s u b s t a n t i a l e c o n o m i e s (u p t o 15% o f u n i t c o s t ) d u e
to
e a r ly a s s u r a n c e o f lo n g e r p r o d u c tio n r u n s .
W id e s p r e a d s u c c e s s f u l
im p le m e n ta tio n c o u ld i n c r e a s e s a v in g s w h ile g r e a t l y s t r e n g t h e n in g
th e
a b ility
of
U .S .
in d u s tr y
to
resp on d
to
a m o b iliz a tio n
c o n tin g e n c y .
S h o r t-te r m
sa v in g s
w ill
r e s u lt
fr o m
ta k in g
a d v a n ta g e
of
c o n tra c t
o p tio n s
and
m a in ta in in g
s ta b le
su b co n tra cto r su p p o rt.
L o n g -te r m s a v i n g s
w ill
be
a c h ie v e d
by
e n c o u r a g in g
in v e s tm e n t
in
b o t t l e n e c k i n d u s t r i e s w h ere c a p a c i t y
c o n s tr a in ts
now
im p o se
h ig h
c o sts.
M ore
e c o n o m ic
order
q u a n titie s
and
in c r e a s e d
c o m p e t i t i o n i n t h e a w a rd o f c o n t r a c t s
w ill
a c h ie v e
lo w e r
u n it
co sts.
S tu d ie s
have
sh ow n
th a t
c o m p e titio n
in
d e fe n se
c o n tr a c tin g can re d u ce u n it c o s t s b y a s
much a s 10% t o 2 0 % .
W eap on
sy ste m s
th a t
are
p o o r ly
m anaged,
e x c e s s iv e ly
c o s tly
in
r e la tio n
to
m is s io n
r e q u ir e m e n ts ,
or
p e r ip h e r a l to
U .S .
d e fe n se
r e q u ir e m e n ts
w ill
be
te r m in a te d .
P r o d u c tiv ity
e n h a n c in g
in v e stm e n ts
(b o th
in
th e
d e fe n s e
i n d u s t r i a l b a s e a n d i n G o v e r n m e n t -o p e r a t e d f a c i l i t i e s ) w i t h
h ig h
p o t e n t i a l s a v in g s w i l l b e e m p h a s iz e d .
The P r e s id e n t s u p p o r t s l e g i s l a t i o n p r o p o se d i n
in itia te
annual
c o s t -o f-liv in g
a d ju s tm e n ts
r e tir e e s .
T h i s s t e p w o u ld r e d u c e o u t l a y s
fo r
p a y b y $ 6 8 m i l l i o n i n 1 9 8 1 and $ 3 8 0 m i l l i o n i n

J a n u a r y t h a t w o u ld
fo r
a ll
F ederal
m ilita r y
r e tir e d
1982.

P erson n el
co sts
c o n s titu te
n e a r ly
h a lf o f th e d e fe n se b u d g e t.
R e d u c t i o n s i n t h e s e e x p e n d i t u r e s w i l l r e s u l t fr o m t h e new F e d e r a l
pay
sta n d a rd
p rop osed
by
th e
A d m in is tr a tio n .
U nder
th is
p r o p o s a l , p a y r a i s e s o f 4 .8 % f o r c i v i l i a n p e r s o n n e l a r e e s t i m a t e d
fo r
1982.
A s a r e s u l t , t h e D e p a r tm e n t o f D e f e n s e o u t l a y s w o u ld
b e r e d u c e d b y a b o u t $ 2 . 0 b i l l i o n in 1 9 8 2 and b y l a r g e r a m o u n ts i n
su b seq u en t y e a r s .
T h ese

a c tio n s

are

e x p e c te d

to

r e s u lt

in

th e

fo llo w in g

O u tla y s ( i n b i l l i o n s o f
1981
1982
1983
1984
P roposed

r e d u c t i o n s ...




-0 .3

-2 .9

8 -2

-4 .8

-5 .9

r e d u c tio n s :

d o lla r s )
1985
1986
-6 .8

-7 .5

A ll

R E D U C T IO N S

OF

FEDERAL

C IV IL IA N

A g e n c ie s

EMPLOYM ENT

C o m p e n s a tio n and b e n e f i t s f o r F e d e r a l c i v i l i a n w o r k e r s c o m p r is e a
s i g n i f i c a n t p a r t o f th e F e d e r a l b u d g e t — a b o u t $ 5 6 .5 b i l l i o n f o r
1981.
A s a s t e p in r e d u c in g th e s i z e , c o s t ,
and
in e ffic ie n c y
of
th e
G o v e rn m e n t,
th e
P r e s id e n t
w ill
im p o s e
new
lo w e r
c iv ilia n
person n el
c e ilin g s
fo r
1981
and
1982
fo r
e x e c u tiv e
bran ch
a g e n c ie s .
At
th e
sam e t i m e , t h e G o v e r n m e n t -w id e h i r i n g f r e e z e
w i l l be l i f t e d fo r th o se a g e n c ie s th a t a re
a b le
to
m eet
th e ir
r e v is e d
lo w e r
p erson n el c e ilin g s .
T h e s e lo w e r p e r s o n n e l l e v e l s
w i l l h e l p f o s t e r a new
a ttitu d e
to w .ard
e lim in a t in g
w a ste
and
i n e f f i c i e n c y i n G o v e r n m e n t an d s p u r i n c r e a s e d p r o d u c t i v i t y .
L o w e r l e v e l s o f F e d e r a l e m p lo y m e n t w i l l b e a p p r o p r i a t e b e c a u s e o f
red u ced
program
le v e ls
in
th e
r e v is e d
R eagan
b u d g e t.
In
a d d i t i o n , l o w e r F e d e r a l e m p lo y m e n t l e v e l s
w ill
be
a c h ie v e d
by
r e d u c in g
overhead
and
by
g r e a t e r e f f i c i e n c i e s in c a r r y in g o u t
F e d e r a l p rogram s.
T o m e e t t h e N a t i o n ' s h i g h e s t p r i o r i t y n e e d s and
to
assu re
th a t
e s s e n tia l
s e r v ic e s
are
n ot in te r r u p te d , heads o f a g e n c ie s have
b e e n i n s t r u c t e d t o m ake
r e a llo c a tio n s
w ith in
th e ir
r e s p e c tiv e
a g e n c ie s .
T h is
w ill
r e s u l t i n m o re e f f i c i e n t u s e o f p e r s o n n e l
and fu n d s b y t a r g e t i n g li m i t e d r e s o u r c e s t o t h o s e o p e r a t io n s t h a t
v i t a l l y a f f e c t th e N a tio n .
F o r n o n d e f e n s e a g e n c i e s , w i t h a fe w e x c e p t i o n s
( e .g .,
p o s itio n s
fo r
d i r e c t m e d i c a l c a r e ) , c i v i l i a n e m p lo y m e n t w i l l b e r e d u c e d t o
a l e v e l t h a t w o u ld h a v e b e e n a c h i e v e d
if
th e
to ta l
fr e e z e
on
h i r i n g r e m a in e d i n e f f e c t t h r o u g h o u t 1 9 8 1 .
T h is w i l l r e s u l t in a
r e d u c tio n
of
4 3 ,0 0 0
p o s itio n s
fr o m
th e C a r te r a d m in is tr a tio n
b u d get e s tim a te s fo r 1 9 8 1 .
For 1982 th e r e w i l l be a r e d u c tio n o f
8 3 ,0 0 0 p o s i t io n s
fr o m
th e
C a rter
budget
and
fo r
th e
years
1 9 8 3 -1 9 8 6 th e r e w i l l be fu r th e r r e d u c tio n s each y e a r .
F or th e n o n d e fe n se a g e n c ie s
about
$500 m illio n in 1981
t h i s am ount $ 4 0 0 m i l l i o n i n
n o t b een r e f l e c t e d in o th e r
For
fr o m
1982
The

t h i s w i l l r e s u lt in o u t la y s a v in g s o f
and a b o u t $ 1 ,9 0 0 m i l l i o n i n 1 9 8 2 .
Of
1 9 8 1 and $ 1 ,3 0 0 m i l l i o n in 1 9 8 2
have
program l i s t i n g s .

t h e D e p a r t m e n t o f D e f e n s e , c i v i l i a n e m p lo y m e n t w i l l i n c r e a s e
t h e C a r t e r b u d g e t b y 1 4 ,0 0 0 p o s i t i o n s in 1 9 8 1 ; b y 2 0 ,0 0 0
in
a n d 1 9 8 3 ; a n d b y l e s s e r a m o u n ts i n l a t e r y e a r s .
fo llo w in g




changes

are

e x p e c te d :

8 -3

P E R SO N N E L

C O M P E N S A T IO N

AND

B E N E F IT S

B u d g e t A u t h o r i t y and O u t l a y s
___________ ( i n b i l l i o n s o f d o l l a r s ) _____________
1981
1982
1983
1984
1985
1986
C u r r e n t b a s e 1 / .....................
P o te n tia l change:
D e fe n s e . . . . . . . . . . . . .
N o n d e fe n se :
C o v e re d e ls e w h e r e 2 /
O t h e r c h a n g e s ...............
P r o p o s e d b u d g e t .....................

5 6 .5

5 8 .0

5 8 .0

5 8 .0

5 8 .0

5 8 .0

0 .2

0 .4

0 .4

0 .3

0 .2

0 .1

-0 .1
-0 .4
5 6 .2

-0 .6
-1 .3
5 6 .5

-0 .6
-1 .8
5 6 .0

-0 .6
-2 .3
5 5 .4

-0 .6
-2 .8
5 4 .8

-0 .7
-3 .3
5 4 .1

1981

Number o f
1982

E m p lo y e e s ( T h o u s a n d s )
1983
1984
1985
1986

C u rren t b a s e :
T o t a l .........................................
2 ,1 1 1
2 ,1 3 2
2 ,1 3 2
2 ,1 3 2
2 ,1 3 2
D e f e n s e ...........................
(9 1 6 )(9 1 6 )
(9 1 6 )
(9 1 6 )
(9 1 6 )
N o n d e f e n s e .................. ( 1 , 1 9 5 ) ( 1 , 2 1 6 ) ( 1 , 2 1 6 ) ( 1 , 2 1 6 ) ( 1 , 2 1 6 ) ( 1
P o te n tia l change:
D e f e n s e ................................... ............ 1 4
20
20
14
8
N o n d e f e n s e ...........................
-4 3
-8 3
-1 0 3
-1 2 2
-1 4 2
P rop osed b u d g e t:
T o t a l . ......................................
2 ,0 8 2
2 ,0 6 9
2 ,0 4 9
2 ,0 2 4
1 ,9 9 8
D e f e n s e ...........................
(9 3 0 )(9 3 6 )
(9 3 6 )
(9 3 0 )
(9 2 4 )
N o n d e f e n s e .................. ( 1 , 1 5 2 ) ( 1 , 1 3 3 ) ( 1 , 1 1 3 ) ( 1 , 0 9 4 ) ( 1 , 0 7 4 ) ( 1

1 / E x c lu d in g f u t u r e p a y a d ju s t m e n t s .
2/
T hese
s a v in g s
are
r e f l e c t e d e ls e w h e r e
r e s u l t fr o m l i s t e d p r o g r a m r e d u c t i o n s .




8 -4

in

sa v in g s

2 ,1 3 2
(9 1 6 )
,2 1 6 )
2
-1 6 3
1 ,9 7 1
(9 1 8 )
,0 5 3 )

th a t

A ll

R E V IS IO N

OF

FEDERAL

PAY

C O M P A R A B IL IT Y

A g e n c ie s

STA N D A R D

As p a rt
of
its
gen eral
e ffo r t
to
red u ce
F ederal
overhead,
p e r s o n n e l,
and
r e g u la to r y
c o sts,
th e
A d m in is tr a tio n
w ill
re co m m en d c o m p r e h e n s iv e
le g is la tiv e
changes
in
th e
w ay
th a t
F ederal
c iv ilia n
pay
ra te s
are
se t.
When
en a cted ,
th e se
p r o p o s a l s w i l l r e d u c e o u t l a y s fr o m t h e c u r r e n t s e r v i c e s
base
by
$ 3 .8
b i l l i o n i n 1 9 8 2 an d a p p r o x i m a t e l y $ 3 0 b i l l i o n o v e r t h e n e x t
5 years.
U n d er c u r r e n t la w , th e P r e s i d e n t i s r e q u ir e d t o
m ake
an
annual
a d ju s t m e n t o f F e d e r a l c i v i l i a n p a y r a t e s ( i n c l u d i n g D e p a r tm e n t o f
D e fe n se
c iv ilia n
e m p lo y e e p a y r a t e s ) t o k e e p th em c o m p a r a b le t o
p r iv a te
se cto r
pay.
The
la w
a ls o
p r o v id e s
a
sy ste m
fo r
d e te r m in in g th e p r o p e r a d ju s tm e n t e ach y e a r .
A t th e co re o f t h is
sy ste m
is
a
n a tio n w id e s u r v e y c o n d u c te d b y th e B u reau o f L a b o r
S t a t i s t i c s o f p r i v a t e s e c t o r r a t e s f o r a s a m p le o f
jo b s
m a tch e d
w ith
c o m p a r a b le
w o rk
p e r fo r m e d
by F e d e r a l e m p lo y e e s .
T h e BLS
su r v e y fin d in g s a re t r a n s la t e d in t o r a t e s fo r th e v a r io u s F e d e r a l
p a y l e v e l s th ro u g h
a
le g a lly
p r e s c r ib e d
p rocess
th a t
b le n d s
a n a ly s is
b y OMB and OPM s t a f f , i n p u t b y F e d e r a l e m p lo y e e u n i o n s ,
and
r e c o m m e n d a t io n s
by
a
h ig h -le v e l
P r e s id e n tia l
a d v is o r y
c o m m itte e o f p r i v a t e s e c t o r p ay and la b o r r e l a t i o n s e x p e r t s .
The
P r e s id e n t
r e v ie w s
th e
r e s u ltin g
c o m p a r a b ilit y fin d in g in l a t e
sum m er a n d i f h e a g r e e s t h a t i t i s a p p r o p r i a t e , h e c a n
i m p le m e n t
it
t h r o u g h an E x e c u t iv e o r d e r .
T h e la w a l s o g i v e s t h e P r e s i d e n t
pow er "b e c a u s e
of
n a tio n a l
em ergen cy
or
e c o n o m ic
c o n d itio n s
a ffe c tin g
th e
g e n e r a l w e l f a r e " t o se n d an " a l t e r n a t i v e p l a n " t o
th e C o n gress.
I n t h a t c a s e , h e m ay p r o p o s e w h a t e v e r i n c r e a s e
he
c o n s id e r s
a p p r o p r i a t e , b a s e d on a b a l a n c i n g o f e c o n o m ic c o n c e r n s
w i t h c o n c e r n f o r e q u i t y to w a r d e m p l o y e e s .
W h a te v e r
fig u r e
th e
P r e s id e n t
sen ds
to
th e
C on gress
becom es e f f e c t i v e O c to b e r 1 ,
u n l e s s o n e H ou se o r t h e o t h e r v e t o e s i t .
A n u m b er o f m a jo r s t u d i e s o f t h e c i v i l i a n
p a y s e ttin g
procedures
have
b e en co n d u cted s in c e 1 9 7 0 .
A l l h a v e fo u n d c o m p a r a b i l i t y t o
be
th e
best
b a s is
fo r
F ederal
p a y s e ttin g ,
but
a ll
have
recom m en ded
changes
in
t h e c u r r e n t m e th o d o f i m p l e m e n t i n g t h a t
co n ce p t.
The
la te s t
m a jo r
stu d y
w as
m ade
by
th e
F ord
a d m in is tr a tio n ,
an d
its
re c o m m e n d a tio n s
w ere c o n v e r te d b y th e
C a rter
a d m in is tr a tio n
in to
a
le g is la tiv e
p rop osal
fo r
c o m p r e h e n s iv e r e fo r m .
I t w as n o t a d o p te d b y th e l a s t C o n g r e s s .
The R eagan a d m in is t r a t io n s u p p o r ts th e p r i n c i p l e o f c o m p a r a b ilit y
as
th e
best
b a s is fo r a d ju s tin g F ed e ra l c i v i l i a n p ay, b u t w i l l
p r o p o s e m a jo r c h a n g e s i n t h e
w ay
c o m p a r a b ility
is
d e te r m in e d .
The
fo llo w in g
m a jo r c o m p o n e n t s a r e am ong t h o s e b e i n g c o n s i d e r e d
fo r in c lu s io n in p rop osed l e g i s l a t i v e ch a n g e s:




8 -5

1.

B r o a d e n in g

th e

p r in c ip le

of

c o m p a r a b ility

by:

e s ta b lis h in g
to ta l
c o m p e n s a tio n
c o m p a r a b ility
in c lu d in g
b o th
p a y and
b e n e f i t s , r a th e r th a n j u s t p ay
— in
d e te r m in in g
c o m p a r a b ility ,
th u s
ta k in g
in to
accoun t
th e
fa c t
th a t F ed eral b e n e fits exceed average
p r i v a t e s e c t o r b e n e f i t s ? an d
—

i n c l u d i n g S t a t e and l o c a l g o v e rn m e n t p a y
and
b e n e fits ,
ra th e r
th a n o n ly th o s e o f p r i v a t e in d u s t r y , in th e d a ta
o n w h ic h c o m p e n s a t i o n s c a l e s w i l l b e b a s e d .

2.

E s t a b l i s h i n g t h e F e d e r a l c o m p e n s a tio n c o m p a r a b il i t y s ta n d a r d
at
94%
of
average
n o n -F e d e r a l
c o m p e n s a tio n
(in c lu d in g
b e n e fits ),
th e re b y
r e c o g n iz in g
th o se
a sp e cts
o f F ederal
e m p lo y m e n t
w h ic h
make
it
m o re
a ttr a c tiv e
th a n
m any
c o m p a r a b ly -p a id
jo b s in th e p r iv a t e s e c t o r .
F o r e x a m p le , a
F e d e r a l e m p lo y e e may c h a n g e j o b s a n d c a r e e r p a t h s m any t i m e s
d u r in g a c a r e e r in th e F e d e r a l
s e r v ic e ,
w ith
no
lo s s
of
r e tir e m e n t,
le a v e o r o th e r b e n e f i t s .
A c o m p a r a b le e m p lo y e e
in
th e
p r iv a te
se cto r
s e ld o m
can
o b ta in
c o m p a r a b le
tre a tm e n t.

3.

B r in g in g
F ederal
c o m p e n s a tio n
ra te s
and
p r a c tic e s
m o re
c l o s e l y in l i n e w it h t h o s e o f th e n o n -F e d e r a l s e c t o r b y :
—

—

c h a n g in g c e r t a i n f e a t u r e s o f t h e F e d e r a l w age
b lu e -c o lla r
w ork ers
to
p r o v id e
much
m ore
c o m p a r a b ilit y w ith l o c a l p r e v a i li n g r a t e s ;

—

c h a n g i n g F e d e r a l p rem iu m p a y
la w s
to
m ake
th e m
m o re
c o n s i s t e n t w it h th e F a ir L ab or S ta n d a r d s A c t and p r i v a t e
s e c t o r p r a c t i c e s ; an d

—

4.

s e ttin g
w h ite -c o lla r
pay
on
b l u e - c o l l a r p ay a lr e a d y i s ) ;

p r o v id in g
th e
fle x ib ilitie s
fo r c e .

e x e c u tiv e
to
r e c r u it

a

lo c a lity

bran ch
w ith
and
m anage

b a s is

(a s

sy ste m fo r
a ccu ra te

a d d itio n a l
a
q u a lity

pay
w o rk

P r o v i d i n g a new m e th o d f o r d e t e r m i n i n g a n n u a l
m ilita r y
pay
in c r e a s e s
by
i n d e x i n g th e m d i r e c t l y t o s a l a r y i n c r e a s e s i n
th e n o n -F e d e r a l s e c t o r , r a t h e r th a n t o i n c r e a s e s i n
F ederal
w h it e -c o lla r p a y .

E n a c tm e n t
of
th e se
p r o p o s a ls
i s e x p e c te d t o r e s u l t in a w h ite
c o l l a r p a y in c r e a s e in O cto b er 1981 o f
a p p r o x im a te ly
4 .8 % ,
and
th e fo llo w in g e s tim a te d r e d u c tio n s in c i v i l i a n pay c o s t s :




8 -6

C IV IL IA N

AGENCIES
(in
1982

m illio n s o f
1983
1984

d o lla r s )
1985
1986

C u rren t b a se :
B u d g e t a u t h o r i t y ..........................
O u t l a y s ....................................................
P o lic y r e d u c tio n :
B u d g e t a u t h o r i t y ..........................
O u t l a y s ....................................................
P rop osed b u d g e t:
B u d g e t a u t h o r i t y ..........................
O u t l a y s ....................................................

3 ,3 6 0
3 ,2 2 6

5 ,9 8 6
5 ,8 8 1

8 ,5 0 1
8 ,2 6 6

1 0 ,9 0 7
1 0 ,7 0 6

1 3 ,2 5 8
1 2 ,9 2 9

-2 ,1 6 5
-2 ,0 7 9

-2 ,9 3 8
-2 ,9 0 7

-3 ,4 6 3
-3 ,3 5 6

-3 ,7 4 0
- 3 ,6 9 8

-3 ,9 9 0
-3 ,8 7 3

1 ,1 9 5
1 ,1 4 7

3 ,0 4 8
2 ,9 7 4

5 ,0 3 8
4 ,9 1 0

7 ,1 6 7
7 ,0 0 8

9 ,2 6 8
9 ,0 5 6

DEPARTMENT OP DEFENSE

(C IV IL IA N S
(in

1982
C u rren t b a se :
B u d g e t a u t h o r i t y ..........................
O u t l a y s ....................................................
P o lic y r e d u c tio n :
B u d g e t a u t h o r i t y ..........................
O u t l a y s ....................................................
P rop osed b u d g e t:
B u d g e t a u t h o r i t y ..........................
O u t l a y s ....................................................

ONLY)

m illio n s o f
1983
1984

d o l l a r s ) _______
1985
1986

2 ,5 2 2
2 ,5 2 2

4 ,7 4 7
4 ,7 4 7

6 ,7 7 2
6 ,7 7 2

8 ,6 9 4
8 ,6 9 4

1 0 ,6 1 6
1 0 ,6 1 6

-1 ,6 2 5
-1 ,6 2 5

-2 ,3 8 7
- 2 ,3 8 7

-2 ,8 1 6
-2 ,8 1 6

-3 ,0 3 7
-3 ,0 3 7

-3 ,2 3 0
-3 ,2 3 0

897
897

2 ,3 6 0
2 ,3 6 0

3 ,9 5 6
3 ,9 5 6

5 ,6 5 7
5 ,6 5 7

7 ,3 8 6
7 ,3 8 6

TOTAL C IV IL IA N

PAY INCREASES
______ ( i n m i l l i o n s o f
1982
1983
1984

d o l l a r s ) _______
1985
1986

C u rren t b a se :
B u d g e t a u t h o r i t y ...........................
O u t l a y s ....................................................
P o lic y r e d u c tio n :
B u d g e t a u t h o r i t y ...........................
O u t l a y s ....................................................

5 ,8 8 2
5 ,7 4 8

1 0 ,7 3 3
1 0 ,6 2 8

1 5 ,2 7 3
1 5 ,0 3 8

1 9 ,6 0 1
1 9 ,4 0 0

2 3 ,8 7 4
2 3 ,5 4 5

-3 ,7 9 0
-3 ,7 0 4

-5 ,3 2 5
-5 ,2 9 4

- 6 ,2 7 9
-6 ,1 7 2

-6 ,7 7 7
-6 ,7 3 5

-7 ,2 2 0
-7 ,1 0 3

P rop osed b u d g e t:
B u d g e t a u t h o r i t y ..........................
O u t l a y s .....................................................

2 ,0 9 2
2 ,0 4 4

5 ,4 0 8
5 ,3 3 4

8 ,9 9 4
8 ,8 6 6

1 2 ,8 2 4
1 2 ,6 6 5

1 6 ,6 5 4
1 6 ,4 4 2




8 -7

A ll

S A V IN G S

DUE

TO

R E D U C T IO N

IN

A g e n c ie s

R E G U L A T IO N S

P r e s id e n t
R eagan
has
in itia te d
a
c o m p r e h e n s iv e
program
to
e lim in a t e
u n n ecessary
g o v e r n m e n ta l i n t e r f e r e n c e i n t h e e c o n o m ic
and p r i v a t e
liv e s
of
a ll
A m e r ic a n s .
W h ile
som e
r e g u la to r y
a c t i v i t y i s n e e d e d t o p r o t e c t t h e h e a l t h and s a f e t y o f t h e p u b l i c
—
fe w
w o u ld
su ggest
e lim in a t in g
tr a ffic
s ig n a ls
—
every
r e g u l a t i o n c o s t s t h e t a x p a y e r i n tw o w a y s .
T here a re th e
d ir e c t
co sts
a s s o c ia te d
w ith m a in ta in in g th e b u r e a u c r a c ie s t h a t i s s u e ,
a d m in is te r ,
and
e n fo rc e
r e g u la tio n s .
The
A d m i n i s t r a t i o n 's
prop osal
w ill
redu ce
th e se
c o s t s b y m o re t h a n $ 1 0 0 m i l l i o n i n
1 9 8 1 and a b o u t $ 5 0 0 m i l l i o n i n 1 9 8 2 .
T h ese s a v in g s a re
in c lu d e d
in
o th e r
s a v in g s
sh ow n
e ls e w h e r e .
The
o th e r
co sts
th a t
r e g u l a t i o n s p l a c e on t h e p u b l i c a r e h i g h e r p r i c e s and
govern m en t
in te r fe r e n c e
in t h e ir everyd ay l i v e s .
T h ese c o s t s a re d is c u s s e d
e ls e w h e r e i n t h e P r e s i d e n t 's m e s s a g e .
The b u d g e t im p a c t
of
several
p rop osed b y th e A d m in is tr a tio n

m a jo r
r e d u c tio n s
in
a r e d is c u s s e d b e lo w .

r e g u la tio n

~

D e c o n tro l o f o i l p r ic e s
w ill
not
o n ly
en cou rage
th e
d e v e lo p m e n t
of
o u r p e tr o le u m r e s o u r c e s , i t w i l l r e d u c e
th e d i r e c t c o s t t o th e ta x p a y e r o f govern m en t r e g u la t io n
b y $50 m illio n in 1 9 8 2 .

—

E l i m i n a t i o n o f t h e C o u n c i l o n W age a n d
w i l l s a v e th e ta x p a y e r $ 1 .5 m i l l i o n in

—

E lim in a t io n o f u n n e c e ssa r y g o v e rn m e n ta l c o n t r o ls on
th e
d e liv e r y
o f h e a lth ca re w i ll sa ve $140 m illio n in 1 9 8 2 .
The A d m i n i s t r a t i o n p r o p o s e s t o e li m i n a t e th e
b u rd en som e
b u r e a u c r a c ie s
of
h e a lth
p la n n in g
a g e n c ie s
and
p r o f e s s i o n a l s ta n d a r d s r e v ie w o r g a n i z a t i o n s .

P r ic e
S ta b ility
1981 a lo n e .

In a d d itio n t o th e s e s p e c i f i c r e d u c tio n s , th e s e
fig u r e s
in c lu d e
som e a c r o s s - t h e - b o a r d c u t s i n t h e b u d g e t s o f r e g u l a t o r y a g e n c i e s .
F ew er r e g u l a t o r s w i l l n e c e s s a r i l y r e s u l t i n fe w e r r e g u l a t i o n s and
l e s s h arassm en t o f th e r e g u la te d .




8 -8

S A V IN G S

DUE

TO

R E D U C T IO N S
(d o lla r

R e g u la to r y
A c tiv ity

T o t a l .....................

T h ese

*

F u ll-tim e

sa v in g s




FE D E R A L
in

R E G U LA TO R Y

are

PROGRAMS

1/

m illio n s )

____________ 1 9 8 1 _______________
E m p lo y m e n t*
BA
0

B u s i n e s s an d
c o m m e r c e . . . . ............
E n v ir o n m e n t
a n d e n e r g y ..................
H e a lth c a r e
i n d u s t r y and
o t h e r ................................

1/

IN

a m o u n ts

■ . _______ 1 9 8 2 ________________
_
E m p lo y m e n t*
BA
O

484

13

12

873

34

33

818

64

64

2 ,7 8 4

320

244

277

57

60

1 ,0 2 3

171

207

1 ,5 7 9

134

137

4 ,6 8 0

523

484

in c lu d e d

in

e q u iv a le n t.

8 -9

o th e r

s a v in g s

show n e l s e w h e r e .




ECON M ASSUMPTIONS
O IC
(Calendar years; d o lla r amounts in b illio n s )
19R0
Actual
Major economic in d ica to rs!
Gross national product (percent
changt, fourth quarter ovar
fourth quarter)
Current d o lla r s .....................................
9.8
Constant <1972) d o lla r s ....................
0 .0
G P d e fla to r (percent change, fourth
M
quarter over fourth q u a rte r)..............
9 .9
Consumer Price Index (percent
change, fourth quarter over fourth
quarter) 1 / ................................................. 1 2 .6
Unemployment rate (percent, fourth
qu a rter).......................................................
7.5
Annual eoonosiic assumptions•
Oross national products
Current dollarsa
Amount................................................
2629
Percent change, year over year
8.9
Constant (1972) d o lla rst
Amount............ ................................... 1482
Percent change, year over year. *0.1
Incomei
Personal income....................................
2161
Wages and s a la r ie s ..............................
1)44
Corporate p r o f i t s ................................
242
Price level*
OlfP d e fla to r i
Level (1972*100) annual
average............................................. 177.4
Percent change, year over year.
9.0
Consumer p rice index 1/t
Level (1967*100), annual
average............................................ 247.0
Percent change, year over year. 13.5
Unemployment ratesi
T otal, annual average........................
7.2
Insured, annual average 2 / ..............
3.9
Pederal pay ra is s , October ~
(percent) 3 /i
C iv ilia n ..................................................
9.1
M ilita ry ..................................................
11.7
Intereat ra ts, 91-day Treasury b i l l
(percent) 5 / ..............................................
11.5

1981
Estimate

1982
Estimate

1983
Estimate

1.4

13.3
5.2

11.8

9.5

7.7

6.6

10.5

7.2

7.7

7.0

2920

3293

11.1

12 .8

1497
1.1

11 .0

1984
Estimate

10 .1

1985
Estimate

1986
Estimate

4.2

9.6
4.2

9.1
4.2

5.7

5.2

4.7

6.0

5.1

4.6

4.0

6.5

6.3

5.8

5.6

3700
12.4

4098
10 .8

4500
9.8

4918
9.3

1560
4.2

1638
5.0

1711
4.5

1783
4.2

1858
4.2

2399
1488
240

2675
1667
277

2982
1853
322

3276
2035
363

3580
2221

404

3910
1417
450

195.0
9.9

2 1 1 .1

8.3

225.9
7.0

239.5
6.0

252.4
5.4

264.7
4.9

274.3

297.0
8.3

315.5

11.1

332.7
5.5

348.3
4.7

363.0
4.2

7.8
4.4

7.2
3.8

6.6

3.4

6.4
3.2

6 .0

2.9

5.6
2.7

4.8
12*3 « /

7.0
8.9

7.0
7.9

7.0
7.0

6.4
6.4

6.0
6.0

11 .1

8.9

7.8

7.0

6.0

5.6

4.9

6 .2

1/ CPI for urban wage earnera and c le r ic a l workers. Two vsrsions o f the CPI ars now p u blish 'd. The
index'shown here is that currently used, as required by law, in calcu latin g automatic c o s t - o f-liv in g
incrsasss for indsxed Pederal programs.
2/ This in d icator measures unemployment under State regular unemployment insurance as a percentage
o f covered employment under that program. It does not include recip ien ts o f extended b e n e fits under that
program.
3/ General schedule pay raises become e ffe c t iv e in October — the fir s t month o f that fis c a l year.
Thua, the October 1981 pay ra ise w ill set new pay scales that w ill be in e ffe c t during fis c a l year 1982.
4 / Assumes a basic pay ra iss o f 9.11 in October 1981 plus an additional incrsment o f 3.2 percentage
p oin ts.
5/ Average rate on new issues within period. The p rojection s assume that in terest rates decline
with the rate o f in fla tio n and in fla tion a ry expectations. The p rojection s do not represent a forecast o f
in tsrest rates.



CHANGES PROM CURRENT BASEi
1.

BUDGET AUTHORITY AND OUTLAY SAVINGS AND INCREASES IN GOVERNMENTAL RECEIPTS
REVISE ENTITLEMENTS TO ELIMINATE UNINTENDED BENEFITS

(in m illio n s o f d o lla r s )
1981
BA
D epartm ent o f A g r i c u l t u r e
Pood sta m p s.............................

0)

D epartm ent o f H e a lth and
Human S e r v i c e s
Minimum s o c i a l s e c u r i t y
b e n e f i t s ..................................
A d u lt s tu d e n t s o c i a l
s e c u r i t y b e n e f i t s ............
S o c ia l s e c u r it y
d i s a b i l i t y in s u r a n c e .. .
A id t o f a m i l i e s w ith
d ep en d en t c h i l d r e n
( APDC) .......................................
M e d ic a id ........................ ...........
D epartm ent o f H ou sin g and
Urban D evelop m en t
S u b s id is e d h o u s in g
l e v e l s ................................. ..
S u b s id is e d h o u s in g r e n t s
P u b l ic h o u s in g m o d e rn i­
s a t i o n .......................................
D epartm ent o f L a b or
Unemployment in s u r a n e e
e x te n d e d b e n e f i t s ............
Unemployment in s u r a n c e s
work t e s t ...............................
P e d e r a l e m p lo y e e s i n ju r y
co m p e n sa tio n (F E C A )...*
Unemployment com pen sa­
t i o n f o r e x -s e r v ic e m e m ­
b e r s ...........................................
T ra d e a d ju stm e n t
a s s i s t a n c e ................. ..




1982
O

1983

1984

1985

1986

BA

O

BA

O

BA

O

BA

0

BA

O

150

150

1 ,8 2 8

1 ,8 2 2

2 ,0 1 2

2 ,0 0 4

2 ,4 6 2

2 ,4 5 1

2 ,6 3 6

2 ,6 2 4

2 ,7 7 1

2 ,7 5 9

......

50

-----

1 ,0 0 0

-----

1 ,1 0 0

-----

1 ,1 0 0

-----

1 ,1 0 0

-----

1 ,1 0 0

......

20

-----

700

-----

1 ,2 0 0

-----

1 ,5 0 0

-----

1 ,7 0 0

-----

1 ,7 0 0

-----

65

-----

550

-----

1 ,1 7 5

-----

1 ,7 0 0

-----

2 ,2 2 5

-----

2 ,7 5 0

*
353

*
100

520
1 ,2 3 7

520
1 ,0 1 3

670
2 ,2 1 3

670
1 ,9 8 6

722
3 ,1 6 6

722
2 ,9 3 0

795
4 ,1 8 1

795
3 ,9 1 6

824
5 ,3 1 8

824
5 ,0 2 1

......
500

1
9

3 ,5 3 6
4 ,9 1 6

10
232

3 ,0 2 6
4 ,5 7 4

39
538

3 ,4 4 0
5 ,5 8 7

95
1 ,0 1 8

3 ,4 3 7
6 f 066

223
1 ,7 4 8

3 ,6 2 4
6 ,2 6 9

371
2 ,4 4 5

-----

800

-----

800

-----

800

20

800

60

800

100

400

523

700

1 ,2 3 1

700

477

100

196

100

284

200

287

——

-----

-----

-----

-----

285

-----

285

-----

272

-----

264

-----

-----

102

102

114

114

126

126

138

138

151

151

60

60

175

175

175

175

181

181

183

183

183

183

1 ,1 5 0

1 ,1 5 0

760

760

380

380

380

380

380

380

(3 0 0 ) * *

—

——
—

1.

REVISE ENTITLEMENTS TO ELIMINATE UNINTENDED BENEFITS ( c o n t i n u e d )
1981
BA

1982
0

BA

1983
_ O
_

__ BA

X984
0

BA

1985
0__

BA

1986

O

BA

O

O th er S a y in g s
C i v i l i a n r e t ir e m e n t
an n u al in d e x a t i o n
(COLA).......................................

......

......

558

510

472

424

430

389

416

366

417

367

S u b t o t a l ...........................................

1 *463

978

1 5 ,5 2 2

9 ,0 1 5

1 5 ,5 1 6

1 0 ,9 4 7

1 7 ,3 9 4

1 3 ,0 9 3

1 9 ,1 3 2

1 6 ,0 1 4

2 0 ,9 3 7

1 8 ,7 0 2

1981

1982

1983

1984

1985

1986

^

O th er r e d u c t lo n e t o th e
d e fic it!
D epartm ent o f L abors
B la ck lu n g t r u e t fund

I

----------- ------------------------------------------------------------------•
---------------------------------------------------------------------------------------------------------------------------------------------------- ----------*

$500*000 o r l e e e .

** D e f e r r a l .




(3 0 )

(3 8 8 )

(3 8 6 )

(4 0 7 )

(4 3 9 )

(4 5 9 )

2.

REDUCE MIDDLE-UPPER INCOME BENEFITS
(i n m i l l i o n s o f d o l l a r s )

1981

1982

BA

1984

1983

BA

BA

1985

BA

1986

BA

BA

D epartm ent o f A g r i c u l t u r e
C h ild n u t r i t i o n .T 7 7 r T 7 .

145

42

1# 6 5 7

1,57 5

1,80 0

1 ,70 9

1,93 4

1,83 5

2,04 6

1,94 0

2,15 S

2,045

Departm ent o f E d u c a tio n
S tu d e n t a s s i s t a n c e ..........

338

106

1 ,01 6

803

1,65 9

1 ,49 9

1,85 7

1,80 8

2,07 4

2,01 9

2,28 7

2,233

O th er S a v in g s
S a X lie Mae (s t u d e n t
lo a n s — o f f - b u d g e t ) . .
S u b t o t a l .........................................

n
I

3.

------

483

2 ,67 3

2,37 8

------

(2 ,5 0 0 )

3 ,4 5 9

3 ,20 8

------

(3 ,0 0 0 )

3,79 1

3 ,6 4 3

------

(3 ,5 0 0 )

4 ,1 2 0

3 ,95 9

(4 ,0 0 0 )

4,4 4 5

4 ,2 7 8

RECOVER CLEARLY ALLOCABLE COSTS FROM USERS (INCREASE IN GOVERNMENTAL RECEIPTS)
(in m illio n s o f d o lla r s )

1981

I n c r e a s e s in G overn m en ta l
R e c e ip t s
D epartm ent o f D e fe n s e C iv il t
In la n d w aterw ay
s u b s i d y .............................
D epartm ent o f T r a n s­
p o r ta tio n s
S u b s id ie s f o r a irw a y
and a i r p o r t u s e r s
(F A A )..................................
B oat and y a c h t u s e r
f e e s (C G )........................

S u b t o t a l , in c r e a s e s in
r e c e i p t s .........................................




148

(1 ,9 2 3 )

1982

1983

1984

1985

1986

258

1,8 8 2

10 0

1,98 2

275

300

315

2,15 9

2,442

2,753

3,104

300

400

500

3,017

3,453

3,919

200

2,617

4.

APPLY SOUND CRITERIA TO ECONOMIC SUBSIDY PROGRAMS

(in millions of dollars)

1981
Papartreent off A g r ic u ltu r e
D airy p r i c e s u p p o r ts . . . .
A lc o h o l f u e l s and
biom ass lo a n s ....................
Rural E l e c t r i f i c a t i o n
A d m in istra tio n ( o f f budget ) v. . . . . . . . . . . . . . .
(lo a n gu aran tee
com m itm ents)......... ..
rarm ers Home Admini­
s t r a t i o n ................ ' ..............
( d i r e c t loan o b l i g a ­
t i o n s ) ................
cn
I
U
I

1983

1982

BA

BA

1984

1985

1986

BA

BA

BA

BA

-----

138

1,095

1 1 614

1,887

2,263

2,7 27

505

46

94

3

4

3

3

(3 8 )

(3 8 ) (1 ,1 4 2 )

(1 8 7 )

(5 ,4 9 5 )

-----

30

-----

(1 ,1 4 2 ) (2 ,3 2 8 ) (2 ,3 2 8 ) (3 ,6 0 3 )
(5 ,9 3 5 )
105

(2 .3 5 4 )

563)

30

(3 ,6 0 3 ) (4 ,9 7 5 )

(6 ,4 0 5 )
179

(2 ,3 5 4 )

105

(4 ,9 7 5 )

(6 ,9 2 5 )
255

(2 ,3 5 4 )

179

(6 ,4 5 0 )

(6 ,4 5 0 )

(7 ,4 8 0 )
331

255

407

(2 ,3 5 4 )

(2 ,3 5 4 )

Department o f Com r c e
me
‘ Economic end r e g io n a l
developm ent (in c lu d in g
A ppalachian R egion al
C om m ission )............. ...........

502

24

769

440

854

644

934

755

1,0 10

882

1,085

997

Department o f Energy
S y n th e tic £ u e t s 7 ...............
F o s s il e n e r g y ..................
S o la r e n e r g y .........................
Other en ergy s u p p ly .........
Energy c o n s e r v a t i o n .. . . .
A lc o h o l fu e ls s u b s i d y . ..

545
70
99
148
254
745

275
59
79
37
114

1,028
373
363
186
677
-----

864
361
365
156
310
29

1,064
522
428
178
597
-----

859
433
414
177
611
13

362
605
372
178
427
-----

676
549
406
170
589
15

140
676
330
169
374
-----

224
657
330
158
433
15

25
602
275
176
373
----

256
604
275
163
373
15

121

47

132

149

141

137

150

147

158

157

166

162

584

12

678

67

837

271

SS2

702

926

S14

635

4 ,6 4 4

3,566

4 ,236

4 ,0 7 3

4 ,5 7 8

4 ,4 0 8

4.94 6

4 ,7 62

5,341

5,143

*» — —

600

1,626
1,056

1,356
1,050

Department o f Housing and
Urban Development
S o la r in e r g y and
C on serv a tion B a n k . . . . . .
Community developm ent
su p p ort a s s i s t a n c e .........

......

Department o f Labor
Comprehensive Employment
and T ra in in g (C B T A )....

153

66

Department o f
T ran ap ortat ion
Mass t r a n s i t o p e r a tin g
s u b s id ie s .. . . . . . . . . . . .
Amtrak s u b s i d i e s ........... .
N ortheast c o r r i d o r
improvement p r o j e c t . .
Low volume r a ilr o a d
branch l i n e s ..................
C o o p e ra tiv e au tom otive
re se a rch program .........



25

25

103
431

96
325

581
606

256
485

1,059
760

688

1,528
964

1,083
904

---------

25

288

95

-13

114

20

51

15

25

80

8

88

32

96

62

104

80

112

103

119

110

12

6

13

9

14

13

15

14

16

14

17

15

— *

—

4.

APPLY SOUND CRITERIA TO ECONOMIC SUBSIDY PROGRAMS (c o n tin u e d )

1981
O th er S a v in g s
CAB a i r l i n e s u b s i d y ..........
C o n r a i l ......................................
E x p o r t -I m p o r t Bank............
P o s ta l s e r v ic e s u b s id ie s
A c c e l e r a t i o n o f m in e r a l
le a s in g ( o f f s e t t i n g
r e c e i p t s ) .............................
S u b tota l




1982

0

1983

0

1984

1985

1986

BA

O

BA

0

54
300
2 ,2 5 0
765

54
300
1 ,3 8 0
765

34
150
2 ,4 1 0
779

34
150
1 ,6 0 0
779

2
100

2
100

690

64
550
990
690

2 ,5 6 0
779

1 ,7 1 0
779

800

2,000

2,000

3 ,1 0 0

3 ,1 0 0

3 ,5 0 0

3 ,5 0 0

3 ,5 0 0

3 ,5 0 0

1 0 ,2 9 5

1 5 ,4 2 6

1 4 ,4 4 8

1 6 ,9 7 5

1 7 ,1 6 4

1 8 ,3 7 2

1 9 ,1 0 9

1 8 ,9 8 3

2 0 ,5 6 1

0

BA

-3 5 0
750
250

-2 5 0
60
250

56
400
1 ,9 8 0
632

50
300
410
632

2,110

250

250

800

4 ,1 5 9

1 ,9 2 4

1 3 ,5 4 7

BA

BA
64
550

BA

0

5.

STRETCH OUT AND RETARGET PUBLIC SECTOR CAPITAL IMPROVEMENT PROGRAMS
(in m illio n s o f d o lla r s )

1981
BA
D epartm ent o f
T r a n s p o r t a t io n
F e d e r a l h igh w ay
c o n s t r u c t i o n ........................
Urban mass t r a n s p o r t a ­
tio n c a p it a l g r a n t s ....
A ir p o r t c o n s t r u c t io n .. . .
O th er S a v in g s
E n v iron m en ta l P r o t e c t i o n
A gency*
w a s te t r e a t *
W ater r e s o u r c e d e v e lo p ­
ment c o n s t r u c t i o n . . . . . .
tfl
I
-4




1982
O

BA

1983

0

1984

1985

1986

BA

0

BA

O

BA

0

BA

0

1 ,3 9 0

210
272

1,000

1 ,9 6 4

1,211

2 ,5 4 6

1 ,7 0 0

3 ,2 4 3

2 ,0 8 8

3 ,4 3 7

2 ,2 3 4

950
250

270
140

1 ,0 4 7
278

545
161

1,220
305

975
196

1 ,3 6 8
330

1 ,2 8 4
219

1 ,4 9 7
371

1 ,4 8 0
239

3*610

31

120

244

125

1 ,5 4 0

1 ,0 4 5

1 ,8 6 0

1 ,9 7 0

2 ,1 7 0

1 ,9 6 0

2 ,4 6 5

1 ,9 5 0

-----

-----

95

90

340

337

545

544

515

514

215

217

1 *482

151

6 ,2 9 5

869

5 ,1 6 9

3 ,2 9 9

6 ,4 7 6

5 ,3 8 5

7 ,6 2 6

6 ,0 6 5

7 ,9 8 5

6,120

6.

IMPOSE FISCAL RESTRAINT ON OTHER PROGRAMS OP NATIONAL INTEREST

(in millions of dollars)

1981
BA

D epartm ent o f Commerce
V a r io u s N a t io n a l O c e a n ic
and A tm o s p h e r ic Admin­
i s t r a t i o n p r o g r a m s ..........
D epartm ent o f E d u ca tio n
S c h o o l a s s i s t a n c e in
fe d e r a lly a ffe c te d
a r e a s (im p a c t a i d ) ..........
V o c a t io n a l e d u c a t i o n . . . .
N a t io n a l I n s t i t u t e o f
E d u c a t io n ...............................
I n s t i t u t e o f Museum
S e r v i c e s ..................................
W
I

00

D epartm ent o f E nergy
E nergy r e g u l a t i o n ...............
G e n e r a l s c i e n c e ...................
E nergy in fo r m a t io n and
o v e r h e a d ..................................
D epartm ent o f H e a lth and
Human S e r v ic e 's
N a t io n a l I n s t i t u t e s o f
H e a lt h .......................................
M e d ic a l s e r v i c e s f o r
m erch an t seam en .................
H e a lth p r o f e s s i o n s
e d u c a t i o n ...............................
H e a lth m a in ten a n ce
o r g a n i z a t i o n s ......................
N a t io n a l H e a lth S e r v ic e
C o r p s .........................................
R e g u la t io n o f h e a lt h
c a r e in d u s t r y s
H e a lth p la n n in g ............
PSRO *....................................
(PSRO o b l i g a t i o n s ) .
N a t io n a l R e se a rch S e r ­
v i c e Awards (ADAMHA)•••




1983

1982
O

BA

O

BA

1984
0

1985
0

BA

1986
0

BA

O

BA

9

6

15 2

69

202

148

238

216

250

253

241

223

67
------

82
------

474
236

450
220

523
242

500
242

56 7
259

551
252

608
277

584
269

632
294

613
28 3

------

------

20

22

22

20

23

20

25

21

27

22

12

2

14

12

15

13

16

14

18

16

19

18

33
5

33
4

150
40

127
29

138
45

140
43

131
61

132
61

127
72

123
72

118
84

117
84

13

3

38

27

62

62

67

67

73

73

78

78

126

54

197

145

373

336

512

468

628

584

726

682

39

39

110

110

183

183

194

194

205

205

215

215

219

32

280

126

309

221

336

260

361

297

385

3 13

37

6

24

18

57

27

66

50

69

61

72

73

16

3

31

14

45.

37

54

45

65

54

80

65

159
2 12

190
29
(2 2 7 )

199
31
(2 3 8 )

1 97
234

28
6
(3 8 )
4

10
38

1

100
15
(1 1 9 )
5

62
117

4

168
19
(1 3 6 )
5

87
134

4

180
27
(2 1 5 )
6

6

6

188
223

5

7

6

6.

IMPOSE FISCAL RESTRAINT ON OTHER PROGRAMS OP NATIONAL INTEREST (c o n t in u e d )
1981
BA

D epartm ent o f H ou sin g and
Urban D evelop m en t
P la n n in g a s s i s t a n c e ..........
R e h a b i l i t a t i o n lo a n fu n d
N eig h b o rh o o d s e l f - h e l p
d e v e lo p m e n t...........................

1982
Q

BA

1983
O

BA

O

BA

1984
___O

1985
BA

0

1986
BA

0

3
63

37
130

26
191

39
134

210

36

42
138

211

39

44
140

41
213

46
142

44
214

8

4

10

9

11

10

11

11

12

11

12

12

D epartm ent o f th e I n t e r i o r
Intproved t a r g e t i n g o f
c o n s e r v a t io n e x p e n d i­
t u r e s .........................................
Youth C o n s e r v a t io n C orps

^
to

34
130

573
56

91
52

566
60

270
59

512
60

286
60

465
60

365
60

471
60

349
60

605
60

403
60

D epartm ent o f L abor
Young A d u lt C o n s e r v a t io n
C o r p s .............................

-----

53

250

179

256

248

262

262

269

268

275

274

D epartm ent o f
" T r a n s p o r t a t io n
Highway s a f e t y g r a n t s . . .

-----

-----

167

16

125

112

138

138

162

150

178

163

43
402
241

52
205
248

52
584
334

73
2 ,5 1 3
-9 0

73
1 ,0 6 3

86

98
2 ,9 7 8
-3 9 0

98
1 ,5 2 7
-1 5 6

111

85
60

43
1 ,8 5 4
330

111

616
75

3 ,1 8 7

-200

1 ,8 2 7
-1 2 4

91

82

136

128

160

152

185

178

185

175

200

190

-----

-----

165

85

186

131

203

193

222

223

239

231

63

26

66

15

90

81

120

109

153

141

183

155

2 * 260

832

5 ,7 0 0

3 ,2 1 6

, 486

4 ,4 9 3

5 ,4 9 5

7 ,4 0 7

6 ,1 2 8

8 ,2 4 6

6 ,7 8 3

O th er S a v in g s
C o r p o r a t io n f o r P u b lic
B r o a d c a s t in g ........................
F o r e ig n a i d (F A P )..............
NASA..............................................
N a t io n a l Consumer
C o o p e r a t iv e Bank...............
N a t io n a l Endowments f o r
th e A r ts and H u m an ities
N a t io n a l S c ie n c e
F o u n d a tio n .............................
S u b to ta l




6 ,8 5 7

7.

CONSOLIDATE CATEGORICAL GRANT PROGRAMS INTO BLOCK GRANTS
(in m illio n s o f d o lla r s )

1981______

0

BA
D epartm ent o f E d u c a tio n
E lem en ta ry and s e c o n d a r y
e d u c a t io n p r o g r a m s ..........

_

D epartm ent o f H e a lth and
Human S e r v i c e s
H e a lth and s o c i a l s e r ­
v i c e s p ro g ra m ......................

---------

8.

0

1983

1984

1985

1986

BA

0

BA

0

BA

0

BA

o

1 ,4 9 8

106

1 ,7 6 1

1 ,2 1 7

1 ,9 9 8

1 ,7 6 6

2 ,3 6 6

2 ,0 5 1

2 ,6 1 7

2 ,2 7 2

-----

2#697

2 ,5 4 0

3 ,1 4 8

2 ,9 9 3

3 ,5 3 2

3 ,3 4 7

3 ,8 6 3

3 ,6 7 6

4 ,0 8 4

3 ,9 2 9

-----

4 ,1 9 5

2 ,6 4 6

4 ,9 0 9

4 ,2 1 0

5 ,5 3 0

5 ,1 1 3

6 ,2 2 9

5 ,7 2 7

6 ,7 0 1

6 $201

REDUCE OVERHEAD AND PERSONNEL COSTS OP THE PEDERAL GOVERNMENT
(in m illio n s o f d o lla r s )
1981
BA

D epartm ent o f D e fe n s e M i l i t a r y .........................................

1982
BA

0

1983

1982

1984

1985

1986

BA

O

BA

O

BA

0

BA

0

BA

0

3 ,2 2 7

2 ,9 1 7

5 ,0 9 6

4 ,7 8 6

6 ,3 3 2

5 ,8 5 2

7 ,2 2 9

6 ,7 6 9

8 ,1 0 4

7 ,5 4 4

386

386

1 ,3 4 2

1 ,3 4 2

1 ,8 1 1

1 ,8 1 1

2 ,2 6 4

2 ,2 6 4

2 ,7 6 3

2 ,7 6 3

3 ,2 6 3

3 ,2 6 3

(1 3 7 )

2 ,1 6 5
(5 2 3 )

2 ,0 7 9
(4 8 4 )

2 ,9 3 8
(n .a .)

2 ,9 0 7
(n .a .)

3 ,4 6 3
(n .a .)

3 ,3 5 6
(n .a .)

3 ,7 4 0
(n .a .)

3 ,6 9 8
(n .a .)

3 ,9 9 0
(n .a .)

3 ,8 7 3
(n .a .!

814

TOTAL, ON-BUDGET AUTHORITY
AND OUTLAY SAVINGS.................

348

(1 3 4 )

O th er S a v in g s
P ed eral c i v i l i a n
em p loym en t.............................
P e d e r a l p a y com p ara­
b i l i t y s ta n d a r d ( e f f e c t
on c i v i l i a n a g e n c i e s ) . .

428

734

6 ,7 3 4

6 ,3 3 8

9 ,8 4 5

9 ,5 0 4

1 2 ,0 5 9

1 1 ,4 7 2

1 3 ,7 3 2

1 3 ,2 3 0

1 5 ,3 5 7

1 4 ,6 8 0

1 0 ,6 6 1

4 ,7 6 7

5 4 ,6 6 6

3 4 ,7 5 7

5 8 ,8 1 0

5 0 ,1 0 9

6 9 ,0 8 2

6 1 ,3 6 5
a xaiMm
x

7 6 ,6 1 8

7 0 ,2 3 2

8 2 ,6 5 4

7 7 ,3 2 5

1 / T h ese s a v in g s a r e a lr e a d y in c lu d e d in th e a b o v e it e m s .




SUMMARY TOTALS

(in m illio n s o f d o lla r s )

1981

1982

1983

T o t a l, o n -b u d g e t a u t h o r it y
a n d o u t l a y s a v i n g s ...............

O f f - b u d g e t It e m s
R u ra l E le c t r if ic a t io n
A d m i n i s t r a t i o n .................
(L o a n g u a r a n te e
c o m m i t m e n t s ) ...............
S tu d e n t Lo an M a r k e tin g
A s s o c ia t io n ( S a llie
l ) .....................................

T o t a l, b u d ge t a u t h o r it y
M d o u t l a y s a v i n g s ..............
O th e r

R e d a c t lo n e

to

1 0 ,6 6 1

4 ,7 6 7

5 4 ,6 6 6

3 4 ,7 5 7

5 8 ,8 1 0

5 0 ,1 0 9

6 9 ,0 8 2

6 1 ,3 6 5

7 6 ,6 1 8

7 0 ,2 3 2

8 2 ,6 5 4

7 7 ,3 2 5

1 ,1 4 2

1 ,1 4 2

2 ,3 2 8

2 ,3 2 8

3 ,6 0 3

3 ,6 0 3

4 ,9 7 5

4 ,9 7 5

6 ,4 5 0

6 ,4 5 0

(1 8 7 )

.....

1 0 ,6 9 9

(5 ,4 9 5 )

—

0

(5 ,9 3 5 )

O

(6 ,4 0 5 )

-----

4 ,8 0 5

BA

1 ,9 2 3

-----

2 ,5 0 0

5 5 ,8 0 0

3 7 ,8 2 2

6 1 ,1 3 8

5 4 ,9 3 7

—

7 2 ,6 8 5

BA

1986

BA

38

BA

1985

0

38

O

1984

BA

0

(6 ,9 2 5 )

BA

O

(7 ,4 8 0 )

3 ,0 0 0

-----

3 ,5 0 0

-----

4 ,0 0 0

6 7 ,9 6 8

8 1 ,5 9 3

7 8 ,7 0 7

8 9 ,1 0 4

8 7 ,7 7 5

th e

" K i r s r t ----------------------------S la c k

fu n d ...

30

378

354

354

382

469

in go v e rn m e n ta l
( l o r A e t a 11
3 o f t h is t a b le ).

1 ,9 8 2

2 ,6 1 7

3 ,0 1 7

3 ,0 1 7

3 ,4 5 3

3 ,9 1 9

ORAMD T O T A L , r e d u c t i o n s t o
t h e d e f i c i t fr o m i t e m s
l i s t e d a b o v e . . .......................

6 ,8 1 7

4 0 ,8 1 7

5 8 ,3 0 8

7 1 ,3 3 9

8 2 ,5 4 2

9 2 ,1 6 3

In c r e a s e s
R e c e ip t s
se e P a r t

lu n g




tru st

Changes from Current Base
Summary T a b le o f Budget A u th o r ity and O u tla y S a v in g s by Agency
and In c r e a s e s t o Governmental R e c e ip ts
FY 1981 - 1986
( I n m i ll io n s o f d o l l a r s )

1*

Budget A u t h o r ity and O u tla y S a v in g s
Item
1981
0

BA
Department o f A g r ic u lt u r e
D a ir y p ric e su p p o rts
(Commodity C re d it
C o r p o r a t io n ) .............
Pood S ta m p s*••••••*«••
C h ild N u t r i t i o n . «.•••«
R ural e le c t r if ic a t io n
A d m in is tr a tio n ( o f f bu dget) • * . . . . . * . « • » • *
(L o a n gu aran te e
com m itm ents).........
Farmera Home A dm in**•«
( D ir e c t lo a n

1982

----

BA

150
145

138
150
42

(3 8 )

(3 8 )

---1,828
1,657

1983
0

BA

1,095
1,822
1,575

-—
2,012
1,800

1985

1984
O

BA

1,614
2,004
1,709

---2,462
1,934

0

BA

1,887
2,451
1,835

2,636
2,046

1986
0

BA

2,263
2,624
1,940

---2,771
2,158

0

BA

0

2,727
2,759
2,045

---11,859
9,740

9,724
11,810
9,146

(2 ,3 2 8 ) (2 ,3 2 8 )

(3 ,6 0 3 ) (3 ,6 0 3 )

(4 ,9 7 5 ) (4 ,9 7 5 )

(6 ,4 5 0 ) (6 ,4 5 0 ) (1 8 ,5 3 6 ) 0 8 ,5 3 6 )

(5 ,4 9 5 )

(1 8 7 )

(1 ,1 4 2 ) (1 ,1 4 2 )

(5 ,9 3 5 )
30

(6 ,4 0 5 )
105

(6 ,9 2 5 )
179

(7 ,4 8 0 )
255

30
,

105
(2 ,3 5 4 )

(5 6 5 )

179

255

(2 ,3 5 4 )

(2 ,3 5 4 )

331

(2 ,3 5 4 )

407

(2 ,3 5 4 )

(32,4 2 7 )
569

1,307

(12,3 3 5 )

A lc o h o l F u e l*/B io m a ss
——

94

4

3

3

3

505

153

5,184

7,941

22,6 )3

32,140

882

1,085

997

5,154

3,742

250

253

241

223

1,092

915

1,260

1,13 *

1,326

1,220

6,246

4,657

4,152
1,700

4,369
2,860

4,369
2,400

4,544
3,560

4,544
3,000

19,256
11,160

19,256
8,960

5,852

7,229

505

46

800

406

3,485

4,691

3,842

5,509

4,501

6,432

4,861

> ,l6 l

502

24

769

440

854

644

934

755

1,010

9

6

152

69

202

148

238

216

511

3b

921

*09

1,056

f92

\t \f2

9 fl

Department o f D e f e n s e - M ilit a r y
68
P e r s o n n e l«••••••*••••«
360
Program and a l l o th e r .

68
280

2,387
840

2,387
530

3,736
1,360

3,736
1,050

4,152
2,180

428

348

5,096

4,786

Department o f Commerce
Economic and R e g io n a l
Development ( In c lu d in g
A p p a la c h ia n R e g io n a l
Com m ission 2 / ) ...........
N a t io n a l O ceanic and
A tm ospheric A d m in ...*

S u b t o t a l*




—

S u n a r y T ab le ( c o n 't )
( I n M illio n s o f d o l l a r s )

1981
BA
D ep artn en t o f E d u c a tio n
l l M M t a r y and
Secondary G ra n ts
C o M o l ld a t i o A «•••••••
B ebool A a a ia ta n c e In
tn F e d e r a lly A ffe c te d
A raaa ( la p e c t A i d ) . . *
V o c a t io n a l E d u c a tio n .#
S ta d a a t A a a ia t a n c a . . . .
N a t io n a l I n a t l t u t a o f
E d u c a t i o n . . * * •••••••«
I n a t i t u t e o f Hanoi—

1982
0

BA

1983
BA
___ 0

0

1984
BA

1985
BA
___ 0

0

Item
Totals

1986
BA

0

BA

___ 0

----

----

1,498

106

1,761

1,217

1,998

1,766

2,366

2,051

2,617

2,272

10,240

7,412

67
——
33B

82
---106

474
236
1,016

450
220
803

523
242
1,659

500
242
1,499

567
259
1,857

551
252
1,808

608
277
2,074

584
269
2,019

632
294
2,287

613
283
2,233

2,871
1,308
9,231

2,780
1,266
8,468

20

22

22

20

23

20

25

21

27

22

117

105

14

12

15

13

16

14

18

16

19

18

94

75

TJil

J,U1

T ja

~TJJt

---12
—

n r

2
—

TW

i.* n

U li

3,4*1

MM

T .W

H ,M I

w ,m

P e aa rta e e t o f S a e rtv
*45
70
99
148
254

275
59
79
37
66

1,028
373
363
186
677

864
361
365
156
310

1,064
522
428
178
597

859
433
414
177
611

362
605
372
178
427

676
549
406
170
589

140
676
330
169
374

224
657
330
158
433

25
602
275
176
373

256
604
275
163
373

3,164
2,848
1.867
1.0)5
2,702

3,154
2,663
1,869
861
2,382

13
33

3
33

38
150

27
127

62
138

62
140

67
131

67
132

73
127

73
123

78
118

78
117

331
697

310
672

743
5

114
4

—_

29
29

----

13
43

--------

61

15
61

15
72

84

15
84

745
307

201
293

— 57®

F o o a ll E n e r g y .. ...........
t o l a r E n e r g y . * ............
O tte r S a n rgy S u p p ly ..*
f a a r g y C e a a e r v a t lo a .. .
E ne rgy la fo r m a tIo n and
D e p e rta e a ta l Over bead
In a r g y fe e g n la lt o n . .* . *
A lta h e l f o a l s
S e b a id y 1 /.* .* • « • • • • •

T~*W

TIM

S,TH

i,Mi

~T7SST

f t4 i5

TTEW

TTWS

---—

1,000
550
700

1,100
1,175
1,200

--------

1,100
2,750
1,700

-------

O a p e rta sa t o f H e a lth and Huaan S e r v ic e *
S o c ia l i e c a r i t y ---50
M ia ta u a B e a e f it a . . » * .
—
65
D i s a b i l i t y In su ra n c e .
—
20
Student t e o e f t t e .......
A id to F a a lli e a w ith
*
a
Demandant C h ild r e n . . .
353
100
N a d le a id
H e a lth and S o c ia l
S e rv ic e e gra n t




----

----

40

45

—
—
—

--------

— -

72

~T7WT T H 5

1,100
1,700
1,500

—
—

1,100
2,225
1,700

—
—

--------

5,450
8,465
6,820

520
1,237

520
1,013

670
2,213

670
1,986

722
3,166

722
2,930

795
4,181

795
3,916

824
5,318

824
5,021

3,531
16,468

3,511
14,966

2,697

2,540

1,148

2,993

3,532

3,347

3,863

3,676

4,084

3,929

17,324

16,485

3
Sionary Table ( c o n 't )
(In a i l l i o n s o f d o lla r s )

1981
BA

1982
0

1983

1984

1985

It e a
T o t a ls
BA
0

1986

8A

0

BA

0

BA

0

BA

0

BA

0

R e g u la tio n o f H e a lth C a rs
In d u s t r y
28
6
(3 8 )

10
38

too
15
(1 1 9 )

62
117

168
19
(1 3 6 )

87
134

180
27
(215 )

159
212

190
29
(227 )

188
223

199
31
(23 8 )

197
234

126

54

197

145

373

336

512

468

628

584

726

682

2.562

2,269

219

32

280

126

309

221

336

260

361

297

385

313

1,890

1,249

37

6

24

18

57

27

66

50

69

61

72

73

325

235

4

1

5

4

5

4

6

6

6

5

7

6

33

26

39

39

no

no

183

183

194

194

205

205

215

215

946

946

16

3

31

14

45

37

54

45

65

54

80

65

291

218

— ITS

■■PSRO* $ ••••••••••••••
(P 8 IO o b l i g a t i o n s ) .*
N a t io n a l I n s t i t u t e s
o f H e a lth 4 V ** • • • • • • *
H e a lth P r o f e s s Io n a
E d u c a tio n ...................
H e a lth H ain ta n a n ce
O r g a n i s a t i o n s ............
N a t io n a l Reeearch
S e r v ic e Awards
(ADAHHA) 4 / ................
Merchant s7aeen
(P B S ) 5 /• *• • • • • • • • • • *
N a t io n a l H e a lth S e r v ic e
C o rp s S c h o l a r s h i p * * * .

5,216

1 ,^ 1 9

*,1 9 0

10,153

S,795

12,693

10,3$2

15,029

ll,9 4 t

17,104

44,362

62,321

26

39

36

42

39

44

41

46

44

242

189

191

134

210

138

211

140

213

142

214

814

1,102

9

11

10

11

11

12

11

12

12

64

57

12

678

67

837

271

882

702

926

814

3,907

1,866

10
232

3,026
4,574

39
538

3,440
5,587

95
1,018

3,437
6,066

223
1,748

3,624
6,269

371
2,445

17,063
27,912

739
5,990

----

800

----

800

20

800

60

800

100

4 1000

180

149

141

137

150

147

158

157

166

162

868

799

629

$7*03

1,037

11,005

1,812

11,539

3,155

11,985

4,162

54,8?0

10.922

D e p artee nt o f H o u sin g and Urban Oevelopeent
37
34
i
P la n n in g A s s is t a n c e * * * *
R e h a b i li t a t i o n Loan
130
63
130
N eighborhood S e lf - H e lp
10
4
8
Development * * * * * .........
Community Development
----—
584
Sup port A s s i s t a n c e *••*
S u b s id is e d H ou sing
---3,536
1
4,916
9
500
- r e s t c o n t r i b u t i o n s ** *
P u b lic H o u sin g
800
(3 0 0 )* * ---S o la r Ene rgy and
132
47
121




127

10,145

865
127
(973)

703
958

Suonary Table (con't)
(In Millions of dollars)
Item

1981

1982
BA

apart— a t o f t in In t a r io r
Iip r o v t ^ u r g t t l n c of
c A t ia m c lo B n o tn d *
lt««r«a.........................
Youth C tt M tr v a tlo t

1983
0

1984
BA

BA

1985
0

BA

1986
0

BA

T o ta ls
BA

0

373

91

566

270

512

286

465

365

471

349

605

403

3,192

1,764

56

32

60

59

60

60

60

60

60

60

60

60

356

351

;« s

2 ,It*

—

*» P»rimmt o f la b o r
Ia M r t a e t *
b l i a M B o a a f it a .......
f c w a y U y i t t la m r a t e r *
H ifh Taoc•«*•«••••••*•
m IIm
l« f o a -s a r v lc a
i M k i f i ••••••••••••••■
T ia lt M ] i« ( a M t
AOOIOCMMO «•••••••••••
C M f i t l M t l v t ftnploym m
M i T ra in ! a *
(CKEft)••*••••••••••*••
!«a« g M a l i C aosart i t l « » C o r jo .......... .
Podarai t a p lo y w i l i j n r i
C M f M M t l W ( f « C A ).. .
m

u

u

i

..................

fta»art«aat o f T r a t s p o r u t l M
Podarai Kl|lw«y
C o n stru c tio n ••••*•••«•
ttrtoa Haas T r a M f a r u c i M '
C sp lC tl C f M t l •••••«•
O ^ a r a ila i S u b s id ie s ..
A irp o rt C o n str u c tio n ...
AMTBAK S u k H t M ..........
Nortboaat C o rrid o r
l i f r t v M M t P r o j e c t . ..
Low voluaa r a ilr o a d
b f t ic k l i n o s «•••••»•••
Highway Safe ty C ra n ia ..
Cooperative Automotive
Research Progran ........




400

TCJ

—

rar

—

— m

— m

---- 15*

51*

477

too

196

100

284

20
0

287

2,200

2,998

283

—

272

—

264

-------

1,106

183

183

183

183

937

957

700

1.231

700

----

----

----

----

283

-------

to

173

173

17*

173

181

181

S I)

— -

60

— KT

— 5TT — m

57T —

t

—

—

1 *130

1,130

760

760

380

380

380

380

380

380

3.030

3.030

IS )

615

4,644

3,366

4,236

4,073

4,378

4,408

4,946

4,762

3,341

3.143

23.898

22.387

3)

230

179

236

248

262

262

269

268

273

274

1.312

1,284

102

102

114

114

126

126

138

138

131

131

631

631

r m

i tl i i

l.4»

“ 1W
T

XHT

i, 3 t t

6,6*2

12,548

32.4lH

—
----

—

n r

1,1)1

----

----

1,390

244

1,964

1,211

2,346

1,700

3,243

2,088

3,437

2,234

12,580

7,477

210
---272
25

31
---120
25

930
103
230
431

270
96
140
323

1,047
381
278
606

343
236
161
483

1,220
1,059
305
760

975
600
196
688

1,368
1,528
330
964

1,284
1,083
219
904

1,497
1,626
371
1,036

1,480
1.336
239
1,030

6,292
4,897
1,806
1,842

4,585
3.391
1,073
3,477

----

25

288

95

-13

114

20

31

15

25

----

----

310

310

B0
----

8
----

88
167

32
16

96
123

62
112

104
138

80
138

112
162

103
130

119
178

no
163

399
770

395
579

12

6

13

9

14

13

15

14

16

14

17

IS

87

71

J ,68U

”1,77 7

'4,69B

ZTTO

TTTUT

hlEKT

—

m

T W

6.46)

TTTTFT’ "4\T47

-r m

T TTT 21, Ib
TP
U

Suenary Table (con't)
(In millions of dollars)
Item

1981
HA

1982
0

BA

1984

1983
0

1985

0

BA

BA

0

BA

1986

___0

Totals

&A

0

BA

Ocher Independent Agencies
CPA Waste Treatment
NASA..............................
C i v i l Aeronautics
B o a rd -A lrlin a su b sid y*
C orporation fo r P u b lic
ftro a d caa tin g.. . . . . . . . .

75

60

3,610
330

125
241

1,540
248

1,045
334

1,860
-90

1,970
86

2,170
-390

1,960
-156

2,465
-200

1,950
-124

12,645
-27

7,050
441

56

50

64

64

54

54

34

34

2

2

210

204

----

—

----

_
_
60
85

43
1,980
1,854

43
410
402

52
2,110
205

52
990
584

73
2,250
2,513

73
1,380
1,063

98
2,410
2,978

98
1,600
1,527

111
2,560
3,187

111
1.710
1,827

377
12,060
11,353

377
6,150
5,488

82

136

128

160

152

185

178

185

175

200

190

957

905

_
_

165

85

186

131

203

193

222

223

239

231

1,015

863

26

66

15

90

81

120

109

153

141

183

155

675

527

250

558
632

510
632

472
690

424
690

430
765

389
765

416
779

366
779

417
779

367
779

2,293
3,895

2.056
3,895

F oreign A id (F A P)«.......
616
N a tio n a l Consumer
Cooperative Bank.........
91
N a tio n a l Endowment fo r
the A rta /H u m an ltle a..
---N a tio n a l Science
F o u n d a tio n .................
63
O ffic e o f Personnel Management
In s t i t u t i o n o f annual
COLA............................
....
P o s ta l S e rv ic e Sub aidlea 230
Student Loan M arketing
A a a o c la tlo n ( o f f -

(1 ,923)
Water Resource Development
C o n stru c tio n programe•
---Corps o f E n g ln e e ra ... ( ---- )
Hater A Power Resources
S e r v ic e ••••••••••••• ( ■ " “)
S o i l Conservation
S e r v i c e . ( ---- )
U .S . R ailw ay A sso c ia tio n
C o n ra ll s u b s id ie s ....... -330.

_
_

(2,500)

----

(3,000)

----

(3,500)

----

(4,000)

---- (14,923)
1,710
1,702
(1,449) (1,449)




95
(50)

90
(50)

340
(296)

337
(296)

545
(485)

544
(485)

515
(439)

514
(439)

215
(179)

217
(179)

( ---- )

(35)

(35)

(28)

(28)

(43)

(43)

(57)

(57)

(20)

(20)

(183)

(183)

( ---- )

(10)

(5 )

(16)

(13)

(17)

(16)

(19)

(18)

(16)

(18)

(78)

(70)

-250

400

300

550

550

300

300

150

150

*1 )

Federal Personnel
Reduction not
re late d to ebove
red u ction s »•••••••••*•
386
E ff e c t s on c i v i l i a n
agency pay coats o f
r e v ia in g the Federal
Pay C om p arability
Standard •■••••••••••• •
— ■*
M in e ra l Le asin g on
Outer C o n tin e n ta l
S h e lf and Federal
Lande 6
/
2
5
0

( ---- )

9,425

3,031

6,707

5,434

“5,208

7,104

4,720

7,411

10,258

386

1,342

1.342

1,811

1,811

2,264

2,264

2,763

2,763

3,263

2,165

2 ,079

2,938

2,907

3,463

3,356

3,740

3,698

800

800

2,000

2,000

3,100

3,100

3,500

3,500

250

1,150

1.150

48,313

30,808

3,263

11,829

11,829

3,990

3,873

16,296

15,913

1,500

3,500

13,150

13,150

100

100

Sunmary T ab le ( c o n 'c )

(in Million* of dollars)
I te a

19aI

1982

1983

___ 1984 ____

1985

____ 1986

Totals

BA
TOTAL, O n-Budget A u t h o r it y
sa d O u tla y S a v i n g s . 10.661

O f f-b u d g e t Ite m s Bu reI B le c t r if lc a t l o e A d m in is tr a ­
t i o n . . . . . ................
38
( L e s s g u sr sn te e
c e a n lt e e n t e ) • . . *
(1 8 7 )
Stu d e n t Loee M arket laia
c l e t l e e ............
....
TOTAL, Budget A u t h o r ity
sa d O u tla y S a v i n g * . 10,699

(fl

•5

*
**

4,767

3g

0

EA

0

BA

0

BA

0

BA

0

54,666

34,757

58,810

50,109

69,082

61,365

76,618

70,232

82,654

77,325

1,142

1,142

2,328

2,328

3,603

3.603

4,975

4,975

6,450

6,450

(5 ,4 9 5 )

(5 ,9 3 5 )

(6 ,4 0 5 )

(6 ,9 2 5 )

(7 ,4 8 0 )

BA

3 5 2 ,4 9 1 2 9 8 ,5 5 5

18,536
0 2 ,4 2 7 )

....

....

1,923

----

2,500

----

3,000

----

3,500

----

4,000

4,805

55,808

37,822

61,138

54,937

72,685

67,968

81,593

78,707

89,104

87,775

—

14,923

371,027 332,014

te e s thee 1^66 tWouoa n i
B e fe rra l
The a p p r o p r la tle n e f o r the A lc o h o l F u e ls and B lo o a sa program s ere in the Departaent o f the T re a su ry ,
fe e d s f o r the A p p a la c h ia n B a g lo n e I Coon le s io n ere a p p ro p ria te d to the P r e s id e n t.
ie a e o f the se s a v in g a are to he d e riv e d fr o a a ge n c ie s other than the Depertoent o f H ea lth end Hunan S e r v ic e s .
B i le le n t I o n o f N a t io n a l Baeearch S e r v ic e Awards I s a ls o In clu d ed in R a tio n a l I n s t i t u t e s of H ea lth re d u c tio n .
T h sss se v te ga to the P u b lic H e a lth S e r v ic e w i l l be p a r t i a l l y o f f s e t by add It lo n e I coete to the U .S . Coast Guard, the Merchant
M a rin e aed se v e r a l oth er e g o e c le s .
O f f s e t In clu d e d fo r D epartaent o f I n t e r i o r o p e r a tin g c o s t s and paynents to s t a t e s .




18,536

II*

O th e r R e d u c tio n s t o

th e D e f i c i t
(in n i lli o n s o f d o lla r s )
____ 1983
1984

1981
B la c k Lung T r u s t Fund re fo rm

1982

30

378

354

3 53

382

469

6 ,3 0 0

8 ,0 0 0

1 2 ,0 0 0

1 6 ,0 0 0

1 8 ,0 0 0

30

6 ,6 7 8

8 ,3 5 4

1 2 ,3 5 3

1 6 ,3 8 2

1 8 ,4 6 9

706

2 ,6 1 7

2 ,5 6 5

2 ,6 0 3

2 ,6 3 7

2 ,6 1 5

736

9 ,2 9 5

1 0 ,9 1 9

1 4 ,9 5 6

1 9 ,0 1 9

2 1 ,0 8 4

S a a l l e r r e d u c t io n s ( f o r a g e n c ie s l i s t e d above
and f o r o t h e r a g e n c i e s ) t h a t have been
id e n tifie d ( o u t l a y s ) ... . . . . . . . . . . . . . . . . . . .
T o t a l , O th e r r e d u c t io n s t o th e b u d g e t
d e f i c i t ....................................................................
O f f -b u d g e t i t e m s :
S a a l l e r r e d u c t io n s t h a t h ave been I d e n t i f i e d .
T o t a l , O th e r r e d u c t io n s t o th e d e f i c i t ,
i n c lu d i n g o f f - b u d g e t l t e a s . . . . . . . . . . . .

co
i
H
*
CO




1985

1986

III.

In crw m

t o C o v e r n a e n ta l R e c e ip t s

(in Billions of dollars)
1981

1982

198 3

1984

1985

258

2 75

3 00

100

200

300

400

500

1 ,8 8 2

2 ,1 5 9

2 ,4 4 2

2 ,7 5 3

3 ,1 0 4

7755?

2 3 *

T J tT

37T5T

T^O T

1 ,9 8 2

2 ,6 1 7

3 ,0 1 7

3 ,4 5 3

3 ,9 1 9

C orpa o f E n g in e e r s
In la n d W aterw ay Uaer C h arges
In c r e a se f o a l ta x to reco ver o p e r a tio n ,
M a in te n a n c e , and re p la c e m e n t c o s t s and
c a p i t a l c o s t s on new w a t e r w a y s . . . . . . . .
T r a a a p o r ta tlo a
C o a s t Guard
P h a s e -la f e e s f o r C o a st Guard S e r v i c e s .
V a d a ra l A v i a t i o n A d m in is tr a tio n
la c r a a a e t r u s t fund ta x e s t o c o v e r a l l
o p e r a t in g e x p e n s e s ..................................... ..
S u b t o t a l . ..................... ................................ ..
T o t a l , l a c r e a s e s t o g o v e r a a e n ta l
r a c a l p t s . . . . ...............................................

T
«o




1986

IV .

Su— a ry e f f e c t s

on th e d e f i c i t
(in a l l l i o n s o f d o lla r s )
1983
1984

1981

1982

4 ,7 6 7
30

3 4 ,7 5 7
6 ,6 7 8

5 0 ,1 0 9
8 ,3 5 4

6 1 ,3 6 5
1 2 ,3 5 3

7 0 ,2 3 2
1 6 ,3 8 2

7 7 ,3 2 5
1 8 ,4 6 9

4 ,7 9 7

< 1 ,4 3 5

5 8 ,< 6 3

> 3 ,> l 6

8 6 ,6 1 4

$ 5 ,> * <

III).

------

1 ,9 8 2

2 ,6 1 7

3 ,0 1 7

3 ,4 5 3

3 ,9 1 9

T o t a l , e f f e c t on th e b u d g et d e f i c i t . . . .

4 ,7 9 7

4 3 ,4 1 7

6 1 ,0 8 0

7 6 ,7 3 5

9 0 ,0 6 7

9 9 ,7 1 3

O f f -b u d g e t o u t l a y s l i s t e d above (T a b le I ) . . . . . .
O th e r c h a n g e s i n o f f - b u d g e t e n t i t l e s t h a t have
been i d e n t i f i e d (T a b le I I ) . . . . . . . . . . . . . . . . . . .

38

3 ,0 6 5

4 ,8 2 8

6 ,6 0 3

8 ,4 7 5

1 0 ,4 5 0

706

2 ,6 1 7

2 ,5 6 5

2 ,6 0 3

2 ,6 3 7

2 ,6 1 5

744

5 ,6 8 2

7 ,3 9 3

9 ,2 0 6

1 1 ,1 1 2

1 3 ,0 6 5

5 ,5 4 1

4 9 ,0 9 9

6 8 ,4 7 3

8 5 ,9 4 1

1 0 1 ,1 7 9

1 1 2 ,7 7 8

L i s t e d o u t l a y s a v i n g s (T a b le I ) . . . ........... ..
O th e r o u t l a y r e d u c t io n s (T a b le I I ) . . . . . . . . . . . . .
T o t a l , e f f e c t on o u t l a y s * . ...................
I n c r e a s e s t o g o v e rn m e n ta l r e c e i p t s (T a b le

T o t a l, o ff-b u d g e t c

h

a

n

g

e

E f f e c t o n th e d e f i c i t , I n c lu d in g e f f e c t s on
o ff-b u d g e t e
n
t i t i e
s . .. . . . . . . . .

to
I
K
>
a




s

.

1985

1986




I V . P r e sid e n t’s P r o p o s a ls fo r T a x R e d u c t io n




THE PRESIDENT'S PROPOSAL FOR TAX REDUCTION
T h e P r e s i d e n t i s c o m m i t t e d t o i m p l e m e n t i n g an E c o n o m i c
R e c o v e r y Program t h a t w i l l p r om o te a fram ew ork f o r t h e f u t u r e
o f our A m erican economy.
T h i s m em or an d um d e s c r i b e s t h e t w o
m a j o r p r o p o s a l s f o r t a x r e d u c t i o n t h a t a r e an i n t e g r a l p a r t
o f th e program:
i n d i v i d u a l t a x r a t e r e d u c t i o n ; a n d , an
a c c e le r a t e d c o s t recovery system fo r in v e stm e n ts.
Taken t o g e t h e r , th e y p r o v i d e an i n c e n t i v e t a x p o l i c y
d e s ig n e d t o in c r e a s e th e a f t e r - t a x take-hom e pay f o r every
w o r k i n g A m e r i c a n , and an a c c e l e r a t e d c o s t r e c o v e r y s y s t e m
d e s i g n e d t o im p r o v e t h e a f t e r - t a x r a t e o f r e t u r n on i n v e s t ­
m e n t s i n ne w p l a n t a n d e q u i p m e n t .
These changes are c e n t r a l
t o r e s t o r i n g i n c e n t i v e s and s t r e n g t h e n i n g g ro w th and
p r o d u c t i v i t y o f the economy.
They w i l l prom ote each by
i n c r e a s i n g t h e a f t e r - t a x re w a rd s f o r w ork , s a v i n g s , and i n v e s t
m ent.

in

The P r e s i d e n t 's p r o p o s a ls
the fo llo w in g s e c tio n s :
I.

T h irty Percent
In d ivid u als

II.

A ccelerated




Phased

Cost

A.

General

B.

T echn ical

for

tax

Rate

Recovery

E xplanation
E xplanation

redu ction

R eductions

System

are

for

con tained

30 PEPCENT PHASED RATE REDUCTION
Present

Law

Under each o f th e fo u r r a t e s c h e d u le s — j o i n t , s i n g l e ,
m a r r i e d f i l i n g s e p a r a t e l y , and he a d o f h o u s e h o l d — i n d i v i d u a l s
p a y t a x on i n c o n e a t m a r g i n a l r a t e s r a n g i n g b e t w e e n 14 and
70 p e r c e n t .
For i n s t a n c e , f o r m a rrie d i n d i v i d u a l s , ta x
r a t e s r a n g e fro m 14 p e r c e n t f o r t a x a b l e inco m e b e t w e e n
$ 3 , 4 0 0 and $ 5 , 5 0 0 t o 70 p e r c e n t f o r t a x a b l e inco m e i n e x c e s s
o f $ 2 1 5 ,4 0 0 .
A lthough b r a c k e t w id th s vary a cco rd in g to type
o f r e t u r n , a l l s c h e d u l e s u s e t h e same b a s i c t a x r a t e s o f 14
t o 70 p e r c e n t .
For earned incom e,
law t h a t p r o v i d e s f o r a
This p r o v isio n b e n e fits
t a x a b l e income i n e x c e s s
e a r n e d t a x a b l e income in
i s t a x e d a t much h i g h e r
Reasons

for

th ere i s a se p a ra te p r o v is io n in the
" ma x i m um t a x " r a t e o f 5 0 p e r c e n t .
s in g le in d iv id u a ls w ith earned
o f $ 4 1 , 5 0 0 and m a r r i e d c o u p l e s w i t h
excess o f $ 6 0 ,0 0 0 .
Unearned income
r a t e s , r a n g i n g up t o 7 0 p e r c e n t .

Change

I n d i v i d u a l tax burdens have been i n c r e a s in g s t e a d i l y
o v e r t h e p a s t few y e a r s .
I n f l a t i o n has pushed i n d i v i d u a l s
i n t o h i g h e r and h i g h e r m a r g i n a l r a t e b r a c k e t s .
Social
s e c u r i t y ta x in c r e a s e s have been s u b s t a n t i a l as w e l l . * * /
(S e e C h a r t s 1 and 2 . )
High m a r g in a l t a x r a t e s a c t as a d i s i n c e n t i v e b o th t o
w ork and t o s a v e .
Lowering th e s e m a r g in a l r a t e s w i l l h e lp
e l i m i n a t e t h e s e d i s i n c e n t i v e s by a l l o w i n g i n d i v i d u a l s t o
r e t a i n a g r e a t e r sh a re o f i n c r e a s e d o u t p u t which r e s u l t s
f r o m t h e i r own p r o d u c t i v e e f f o r t s .
B e c a u s e o f t h e p a r t i c u l a r way i n w h i c h t h e maxi mum t a x
i s c a l c u l a t e d , th e e f f e c t i v e r a t e on a d d i t i o n a l e a r n e d
i n c o m e may a c t u a l l y b e a b o v e 5 0 p e r c e n t .
For purpose
o f c o m p u t i n g t h e t a x l i a b i l i t y u n d e r t h e maxi mum t a x o n
e a r n e d i n c o m e , e a r n e d i n c o m e i s " s t a c k e d " f i r s t *=- t h a t
is,
i t i s c o n s i d e r e d t o be th e income ta x e d a t th e l o w e s t
r a t e s — and o t h e r incom e i s c o n s i d e r e d " s t a c k e d " o n t o p
o f t h e e a r n e d in c o m e and i s s u b j e c t t o t h e h i g h e r r a t e s .
A s a r e s u l t o f t h i s s t a c k i n g r u l e , an a d d i t i o n a l d o l l a r
o f e a r n e d incom e can i n c r e a s e t a x e s on un e arn e d i n c o m e .
Combined w ith o t h e r i n t e r a c t i o n s such as th e a l l o c a t i o n
o f d e d u c t i o n s b e t w e e n e a r n e d and u n e a r n e d i n c o m e an
a d d i t i o n a l d o l l a r o f e a r n e d income can b e t a x e d a t an
e f f e c t i v e r a t e a b o v e 50 p e r c e n t and a s h i g h a s 70 p e r c e n t .
**/

In 1981 t h e s o c i a l s e c u r i t y t a x r a t e f o r e m p lo y e es and
e m p lo y e r s i n c r e a s e d from 6 . 1 3 p e r c e n t t o 6 . 6 5 p e r c e n t ,
and t h e t a x b a s e w i l l i n c r e a s e fro m $ 2 5 , 9 0 0 t o $ 2 9 , 7 0 0 .




2

T h u s , i n c r e a s i n g th e a f t e r - t a x rew a rds from work w i l l
e n c o u r a g e i n d i v i d u a l s t o work h a r d e r and t o g e n e r a t e more
g o o d s and s e r v i c e s w h ich a r e u s e d by o t h e r s .
Encouraging
s a v i n g w i l l h e l p s p u r th e economy t o g e n e r a t e more i n v e s t m e n t
and a l a r g e r c a p i t a l s t o c k .
An i n c r e a s e i n c a p i t a l i n t u r n
i m p l i e s g r o w th i n p r o d u c t i v i t y , an i n c r e a s e i n t h e r a t e o f
r e a l g r o w t h i n t h e e co n o m y , and h i g h e r r e a l in c o m e s f o r
A m erican s.
H i g h e r o u t p u t i n t h e economy a l s o l e a d s t o i n c r e a s e d
rev en u es t o the government — o f f s e t t i n g p a r t o f the d i r e c t
revenue c o s t o f the tax r e d u c tio n program.
R e d u c e d t a x r a t e s w i l l make t a x s h e l t e r s r e l a t i v e l y
l e s s a t t r a c t i v e , and w i l l e n c o u r a g e i n v e s t m e n t t o move t o
th o s e a c t i v i t i e s th a t are most p r o d u c tiv e .
Under c u r r e n t
l a w , i n d i v i d u a l s a r e o f t e n f o r c e d t o c o n c e n t r a t e more upon
th e ta x con seq uences o f a p a r t i c u l a r typ e o f in v e stm e n t than
upon th e v a lu e (o r p r e - t a x p r o f i t a b i l i t y )
o f the investm ent
its e lf.
T his lea d s to d i s t o r t i o n s in investm ent p a tte r n s
and a l o s s o f o u t p u t t o th e econom y.
M o r e o v e r , r e v e n u e s t o t h e g o v e r n m e n t a r e l o w e r when
i n d i v id u a l s in v e s t in tax s h e l t e r s th a t are l e s s p r o d u c tiv e
t h a n o t h e r i n v e s t m e n t s o r when i n d i v i d u a l s s i m p l y a v o i d
t a x a t i o n l e g a l l y by a v o i d i n g r e a l i z a t i o n o f in c o m e , e . g . , by
n o t s e l l i n g an a s s e t t h a t h a s a p p r e c i a t e d i n v a l u e .
Because
l o w e r m a r g i n a l r a t e s o f t a x w i l l e n c o u r a g e more p r o d u c t i v e
i n v e s t m e n t and w i l l l e a d t o an i n c r e a s e i n r e c o g n i t i o n o f
in c o m e , r e v e n u e l o s s e s from th e r a t e r e d u c t i o n w i l l be
reduced fu r th e r .
T his induced reven ue e f f e c t i s in a d d it io n
t o any i n c r e a s e i n re v e n u e s w h ich w ou ld r e s u l t from i n c r e a s e s
i n p r o d u c t i v i t y and i n t h e a g g r e g a t e am ount o f i n d i v i d u a l
work o r s a v i n g s .
T a x i n g u n e a r n e d in c o m e a t r a t e s b e t w e e n 50 p e r c e n t and
70 p e r c e n t r a i s e s l i t t l e reven ue f o r th e govern m en t.
Moreover,
d i f f e r e n t i a t i n g b e tw e e n e a r n e d in c o m e and u n e a r n e d in co m e
c r e a t e s a d d itio n a l com plexity in the c a lc u la t io n o f ta x e s .
By r e d u c i n g t h e t o p m a r g i n a l r a t e o v e r a 3 - y e a r p e r i o d by
t h e same 30 p e r c e n t t h a t a l l o t h e r r a t e s w i l l b e r e d u c e d ,
t h e m ax i m u m t a x f o r e a r n e d i n c o m e n o l o n g e r w i l l b e n e c e s s a r y
b e c a u s e t h e r e w i l l be no in c o m e s u b j e c t t o a r a t e a b o v e 50
percent.
E a rn e d and u n e a r n e d in c o m e w i l l be t a x e d t h e sa m e ,
b o t h s u b j e c t t o t h e new r a t e s c h e d u l e t h a t w i l l h a v e a t o p
m a r g i n a l r a t e o f 50 p e r c e n t .




3

G en era l E x p la n a tio n
The b a s i c d e s ig n o f th e p r o p o s a l i s s i m p l e :
a l l rates
o f t a x l i s t e d i n th e ta x r a t e s c h e d u l e s w i l l be re d u c e d by
a p p r o x i m a t e l y 30 p e r c e n t .
R ates w i l l be redu ced from t h e i r
p r e s e n t r a n g e o f 1 4 t o 70 p e r c e n t t o a ne w r a n g e o f 1 0 t o 5 0
percent.
Compared w i t h p r e s e n t l a w , t a x r a t e s w i l l b e
re d u c e d by 5 p e r c e n t f o r c a l e n d a r 1 9 8 1 , th e n t o 15 p e r c e n t
f o r c a l e n d a r 1 9 8 2 , 25 p e r c e n t f o r c a l e n d a r 1 9 8 3 and 30
p ercen t fo r calendar 1984.
S e e T a b l e s 1 , 2 , and 3 .
This
r e d u c t i o n i s r o u g h l y e q u i v a l e n t t o a 10 p e r c e n t r e d u c t i o n i n
t a x r a t e s on J u l y 1 , 1 9 8 1 and a f u r t h e r 10 p e r c e n t r e d u c t i o n
on J u ly 1 o f each o f t h e 2 s u c c e e d i n g y e a r s .
W ith holding.
W i t h h o l d i n g w i l l be a d j u s t e d on J u ly 1 ,
1981.
For 1 98 1, the p ercen ta g e re d u ctio n in w ith h o ld in g
r a t e s w i l l be 10 p e r c e n t , o r t w i c e t h e p e r c e n t a g e r e d u c t i o n
in the ta x r a t e s th a t w i l l app ly f o r the e n t i r e c a le n d a r
year.
In e f f e c t , r a t h e r than r e c e i v e a l a r g e re fu n d a t th e
b e g in n in g o f 1 9 8 2 , m ost i n d i v i d u a l s w i l l be a b le t o r e c e i v e
t h e i r e n t i r e ta x r e d u c tio n f o r 1981 over the l a s t h a l f o f
that year.
For a l l y e a r s a f t e r 1 9 8 1 , the p e rc en ta g e r e d u c tio n
i n b o t h w i t h h o l d i n g r a t e s and t a x s c h e d u l e r a t e s w i l l b e t h e
same.
Maxi mum T a x .
By 1 9 8 4 t h e t o p m a r g i n a l r a t e o f 7 0
p e r c e n t w i l l b e r e d u c e d t o 50 p e r c e n t f o r a l l i n c o m e ,
regardless o f source.
T h is w i l l a llo w th e ta x law s t o be
s i m p l i f i e d t h r o u g h e l i m i n a t i o n o f t h e maxi mum t a x o n e a r n e d
incom e.
T a x p a y e r s c u r r e n t l y e l i g i b l e f o r t h e maxi mum t a x o n
e a r n e d income w i l l b e n e f i t from th e a c r o s s - t h e - b o a r d r a t e
redu ction s.
C u r r e n t l y , t a x a b l e income a b o v e $ 4 1 , 5 0 0 f o r
s i n g l e i n d i v i d u a l s and $ 6 0 , 0 0 0 f o r m a r r i e d c o u p l e s i s s u b j e c t
e i t h e r t o a r e g u l a r t a x r a t e o f more t h a n 50 p e r c e n t o r a
ma xi mum t a x r a t e o n e a r n e d i n c o m e o f 5 0 p e r c e n t .
Under th e
p r o p o s a l , a l l t a x a b l e in c o m e b e t w e e n $ 4 1 , 0 0 0 and $ 1 0 8 , 3 0 0
f o r s i n g l e i n d i v i d u a l s and b e tw e e n $ 6 0 , 0 0 0 and $ 2 1 5 , 4 0 0 f o r
m a rried c o u p le s w i l l be taxed a t r a t e s below even th e
c u r r e n t maxi mum t a x r a t e o f 5 0 p e r c e n t .
C apital G ain s.
S i n c e 60 p e r c e n t o f n e t l o n g - t e r m
c a p i t a l g a i n s a r e d e d u c te d from income under c u r r e n t la w ,
l e a v i n g 40 p e r c e n t o f such g a i n s i n c l u d e d i n a d j u s t e d g r o s s
i n c o m e , t h e t o p t a x r a t e on c a p i t a l g a i n s w i l l b e l o w e r e d
f r o m 28 t o 20 p e r c e n t (2 0 p e r c e n t = . 4 x 50 p e r c e n t ) by
January 1 , 1 9 8 4 .
For y e a r s b e fo r e 1 9 8 4 , th e top e f f e c t i v e




A

r a t e w i l l be 2 6 . 4 p e r c e n t i n 1 9 8 1 , 2 4 . 0 p e r c e n t i n 1 9 8 2 , and
2 1 .2 p e rc e n t in 1983.
A d d i t i o n a l l y , t o conform th e e x i s t i n g
a l t e r n a t i v e m i n i m u m t a x t o t h e r e d u c t i o n i n t h e ma xi mum
r e g u l a r t a x on c a p i t a l g a i n s , t h e t o p a l t e r n a t i v e t a x r a t e
w o u l d b e r e d u c e d t o 24 p e r c e n t i n 1 9 8 2 , 21 p e r c e n t i n 1 9 8 3 ,
and 2 0 p e r c e n t i n 1984 and t h e r e a f t e r .
A n alysis

of

Im pact

The r e d u c t i o n in m a r g in a l t a x r a t e s w i l l red u ce i n d i v i d u a l
in co m e t a x l i a b i l i t i e s by 5 . 1 p e r c e n t f o r c a l e n d a r 1 9 8 1 ,
r is in g to 2 7 .3 percent fo r 1984.
A s shown i n C h a r t s 3 - 4 and
T a b l e s 4 - 1 5 , th e p e r c e n t a g e r e d u c t i o n f o r m o st income
c l a s s e s , i s a p p ro x im a te ly the same.
Thus th e d i s t r i b u t i o n o f
th e re d u c tio n is spread in p r o p o rtio n to ta x e s p aid in a l l
incom e c l a s s e s .
D e v i a t i o n s from a f l a t p e r c e n t a g e r e d u c t i o n a t a l l
l e v e l s a r e e x p l a i n e d p r i m a r i l y by i n t e r a c t i o n w it h th e
e a r n e d i n c o m e t a x c r e d i t a n d t h e c u r r e n t l a w maximum t a x o n
earned incom e.
Under t h e p r o p o s a l t h e r a t e r e d u c t i o n s w i l l
r e d u c e t h e amount o f t a x e s b e f o r e c r e d i t s .
The am ount o f
t h e e a r n e d incom e c r e d i t i s n o t c h a n g e d , and as a r e s u l t th e
p e r c e n t a g e r e d u c t io n in t a x a f t e r c r e d i t s can be g r e a t e r
th a n 30 p e r c e n t .
F or e x a m p l e , u n d e r c u r r e n t law a c o u p l e
w it h one dependen t e a r n in g $ 9 ,0 0 0 w ould have ta x b e fo r e
c r e d i t s o f $ 3 7 4 , an e a r n e d in c o m e c r e d i t o f $ 1 2 5 and a t a x
l i a b i l i t y a fte r cred its o f $249.
Under th e p r o p o s a l, in
1 9 8 4 t h i s c o u p l e ' s ta x b e f o r e c r e d i t w ould be re d u ce d 2 9 . 1
p ercen t, to $265.
S in c e th e e a r n e d income c r e d i t w ould
r e m a i n u n c h a n g e d , t h e i r t a x l i a b i l i t y a f t e r 1c r e d i t s w o u l d b e
redu ced to $140 — a 4 3 .8 p e rc e n t r e d u c tio n .
A t h i g h e r l e v e l s o f i n c o m e , t h e r e i s an i n t e r a c t i o n
w i t h t h e maximum t a x o n e a r n e d i n c o m e .
Whereas r e tu r n s w ith
p r o p e r t y in com e r e c e i v e a p p r o x i m a t e l y t h e same p e r c e n t a g e
r e d u c tio n as a l l r e t u r n s , the percen tage red u ction in tax
f o r r e t u r n s w it h $ 1 0 0 , 0 0 0 o r $ 2 0 0 , 0 0 0 in wage income b e g in s
to f a l l below th e p e rcen ta g e re d u c tio n fo r o th e r r e tu r n s .
T h i s i s b e c a u s e earned in co m e, w hich c u r r e n t l y i s s u b j e c t t o
a maximum t a x o f 5 0 p e r c e n t , w i l l s t i l l b e s u b j e c t t o a t o p
m a r g i n a l r a t e o f 50 p e r c e n t .




5

Revenue E f f e c t

As a r e s u l t o f th e i n d i v i d u a l t a x r a t e , r e d u c t i o n s and th e
a c c e l e r a t e d c o s t r e c o v e r y s y s te m , t a x p a y e r s ' a f t e r - t a x incom e
w i l l r i s e s u b s t a n t i a l l y compared t o p r e s e n t t a x la w .
W i t h o u t t h e s e r a t e r e d u c t i o n s , F e d e r a l t a x e s w ou ld consume
a r a p i d l y i n c r e a s i n g s h a r e o f n a t i o n a l income — r i s i n g t o
2 3 . 4 p e r c e n t o f GNP a f t e r 1 9 8 5 .
By c o n t r a s t , t h e s e t a x c h a n g e s
s u b s t a n t i a l l y reduce F ed eral ta x e s r e l a t i v e to the o v e r a ll s i z e
o f th e economy.
Under th e P r e s i d e n t 's program , r e c e i p t s w i l l
f a l l t o 2 0 . 4 p e r c e n t o f GNP i n 1 9 8 2 a n d 1 9 . 3 p e r c e n t b y 1 9 8 5 .
B e ca u se t h e economy w i l l be r a p i d l y g ro w in g in r e s p o n s e t o
t h o s e t a x c h a n g e s and th e o t h e r p a r t s o f th e P r e s i d e n t ' s program ,
F e d e r a l re v e n u e s w i l l s t i l l expand by $340 b i l l i o n from 1 9 8 1 - 8 6 ,
a llo w in g f u l l su p p o rt f o r e s s e n t i a l government program s.
T his
r e p r e s e n t s a l i t t l e more t h a n a 50 p e r c e n t i n c r e a s e i n r e v e n u e s
d u r in g t h i s p e r i o d under th e P r e s i d e n t 's program , compared t o
t h e p r o s p e c t o f n e a r l y a 100 p e r c e n t i n c r e a s e p r o p o s e d by t h e
p rio r A dm in istration .
These ta x changes w i l l c o n t r ib u t e im p o r ta n tly to r a i s i n g
th e l e v e l s o f econom ic a c t i v i t y m a t e r i a l l y above th o s e w hich
w ould be a t t a i n e d under p r e s e n t law .




6

CH
ART 1

INDIVIDUAL INCOME TAX AS PERCENT OF PERSONAL INCOME
1 9 7 0 -1 9 8 4
P ercen t

17

16

Current Law

15

14

13

12

11

10

9
/
0

1970




1972

1974

J_______ L

1976

I

1978
1980
Calendar Year

I

I

1982

I
_______ L

1984

CH
ART 2

INDIVIDUAL INCOME TAX PLUS EMPLOYEE SOCIAL SECURITY
CONTRIBUTIONS AS PERCENT OF PERSONAL INCOME
1 9 7 0 -1 9 8 4

P ercen t
20

19

18

17

16
00

15

14

13

12

X

1970




J_______ L

1972

1974

J_______ I
_______L

1976

J_______ I_______ I_______ L

1978
1980
Calendar Year

1982

_ _ L _

198 4

CHART

3

Marginal Tax Rates Under Current Law and the President’s Proposal for 1984
(J o in t R e t u r n s )

3.4

5.5




7.6

11.9 16.0 20.2 24.6 29.9 35.2 45.8 60.0 85.6109.4 162 4 215.4 over

Taxable Income (Thousands of Dollars)

CH
ART 4

Marginal Tax Rates Under Current Law and the President’s Proposal for 1984




(S in g le

R e tu rn s)

Taxable Income (Thousands of Dollars)

Table 1
The Adsrinf at r a t io n 's Proposed Tax Rate Schedules fo r 1981, 1902, 1983, and 1984
.Joint Returns

A dm in istration Proposal
1982
19B3
1964 and subseouent veara
Tax at
Tax at
Tax rate
Tax rate
Tax at
Tax at
Tax rate
Tax rate
Tax at
Tax rata
tow end of
low end of
on income
on income
low end of
low end o f
on lncoow
on Income
low end of
on incase
bracket
in bracket
bracket
bracket
in bracket
in bracket :
in bracket
bracket
bracket
in bracket
(. d o lla r s .) ( . percent .) (. d o lla r s .) ( . percent .> (. d o lla r s .) ( . percent •) (. d o lla r s .) ( . percent .) (. d o lla r s .) (. percent .)
Praaent law

Taxable
in c c a t
bracket
(••••• d o lla r a
o •
3,400 5,500 -

3,400
5,500
7,600

7,600 .
11,900 16,000 *

11,900
16,000
20,200

630
1,404
2,265

20,200
24,600 29,900 -

24,600
29,900
35,200

35,200 .
45,800 60,000 -

1981

0%
14
16

or

!

n
15

0
0
252

18
21
24

588
1,319
2,139

17
2ft
21

546
1,191
1,929

15
18
21

483
1,085
I , 741

14
16
19

441
1,000
1,615

13
15
18

3,273
A, 505
6,201

28
32
37

3,105
4,293
5,883

27
30
15

2,811
1,867
5,298

24
27
31

2,539
1,507
4,779

22
24
28

2,371
3,295
4,514

21
23
27

45,800
60,000
85,600

8,162
12,720
19,678

43
49
54

7,738
12,084
18,758

41
47
51

6,941
10,861
16,827

37
42
47

6,263
9,761
15,157

13
18
42

5,945
9,137
14,449

32
36
40

33,502
47,544
81,464

59
64
68

31,814
45,142
77,472

56
61
65

28,859
40,759
69,909

50
55
58

25,909
36,619
62♦589

45
49
52

24,689
34,923
59,833

43
47
49

117,504

70

111,922

66

100,649

60

90,149

53

85,803

50

215,400 and over

$

0
0
294

$

Of fle a o f the Secretary o f the Treaaury, O ffic e o f Tax A n a ly sis

$

OX
12
14

01
11
12

o
0
273

109,400
85,600
109,400 • 162,400
162,400 - 215,400

$

$

0
0
211

$

0
0
210

February 13, 1981

J^/ Compared v it h praaent law, tax rates are reduced approximately 5 percent in 1981, 15 percent In 1982, 25 percent in 1983, and 30 percent in 1984*




O
Jt
10
11

Table 2
The Administration's Proposed Tax Rate Schedules for 1981, 1982, 1983, and 1984
Single Returns

$

A dm in istration Proposal

Present law

Taxable
incase
bracket

1981

1983
1984 and subseouent vears
Tax rate
Tax at
Tax rate
Tax at
Tax a t
Tan; rate
Tax: rate
Tax at
Tax at
Tax rate
low end of
on Income
low end of
on Income
low end of
on Income
low end of
on income
low end of
on income
in bracket
bracket
bracket
in bracket
b rac ket
In bracket :
bracket
bracket
in bracket
in bracket
(. d o lla r s .) ( . percent .) (. d o lla r s .) ( pcrcent .) (. d o lla r s .) <. percent .) (. d o lla r s .) (.. percent .) (. d o lla r s .) (. percent .)

2,300

0T

0 .
2,300 3,400 -

3 ,4 0 0
4 ,4 0 0

0
1$4

14
16

0
143

13
15

0
132

12
14

0
121

4,400
6,500 8,500 -

6,500
8,500
10,800

314
692
1,0 72

18
19
21

293
650
1,0 10

17
18
20

272
587
907

15
16
18

10,800
12,900 15,000 -

12,900
15,000
18,200

1,555
2,0 59
2 ,6 0 5

24
26
30

1 ,4 7 0
1 ,9 53
2 ,4 7 8

23
25
28

1,321
1,741
2,2(13

18,200 .
23,500 28,800 -

23,500
28,800
34,100

3 ,5 65
5 ,3 6 7
7,4 34

34
39
44

3,374
5,0 70
7,031

32
37
42

34,100
41,500 .
55,300 -

41,500
55,300
81,800

9 ,7 6 6
13,392
2 0 ,982

49
55
63

9 ,2 5 7
12,735
19,911

81,800
108.300
108,300 and over

37,677
55,697

68
70

35,811
53 ,0 3 6

.

'
>

$

0

0Z

1982

$

o

O ffic e o f the Secretary o f the Treasury, O ffic e of Tax A n a ly sis

$

0

0Z

$

o

OZ
U

$

o

10

12

241
514
794

13
14
16

220
472
732

12
13

20
22
26

1,162
1 ,5 40
1 ,9 60

18
20
22

1,1 0 0
1,478
1,877

18
19
21

3,035
4 ,5 72
6,3 21

29
33
37

2,664
4 ,0 4 2
5,5 79

26
29
34

2,5 49
3,874
5.3 58

25
28
32

47
52
60

8 ,2 82
11,390
17,876

42
47
54

7,381
1 0 ,193
15,989

38
42
48

7,054
9 ,7 1 8
15,238

36
40

65
66

32,186
47 ,5 5 6

58
60

28,709
4 2 ,4 8 9

52
53

2 7 ,428
4 0 ,413

49
50

February 13, 1981

J / Compared with present la v , tax rates are reduced approximately 5 percent In 1981, 15 percent in 1982t 25 percent in 1983, and 30 percent in 1984.




OZ

0
110

11

16

46

Table 3
The A ds^ n ist rat io n 's Proposed Tax Rate Schedules fo r 1981, 1982, 1983, and 1984
H ead-of-H ousehold Returns

A dm in istration Proposa1
1982
1983
1984 and subseauent re a rs
Tax at
Tax at
Tax rate
Tax rate
Tax at
Tax at
Tax rate
Tax rate
Tax at
Tax rate
low end of
low end of
on incase
on income
low end of
low end of
on inrosM
on incone
low end of
on Income
in bracket
bracket
tn bracket :
bracket
bracket
tn bracket :
in bracket
brecket
bracket —i
in bracket
(. d o lla r s . ) ( percent .) (. d o lla r s .) ( percent .) (. d o lla r s .) ( . percent .) (. d o lla r s .) (.. percent .) (. d o lla r s , (. percent .)
.)
Present law

Taxable
In case
bracket
(•««•* d o tla r s

1981

2,300
4,400
6,500
8,700
11,800
15,000

630
1,026
1,708

18
22
24

588
962
1,613

17
21
21

546
876
1,465

15
19
20

483
791
1,318

14
17
18

441
727
1,223

13
16
17

15,000 •
18,200 23,500 -

18,200
23,500
28,800

2,476
3,308
4,951

26
31
36

2, 349
3,149
4,686

25
29
34

2.105
2,809
4, 187

22
26
31

1,894
2,534
3,806

20
24
27

1,767
2,375
3,594

19
23
26

28,800 •
34,100 •
44,700 -

34,100
44,700
60,600

6,859
9,085
13,961

42
46
54

6,488
8,608
13,272

40
44
51

5,830
7,738
11,872

36
39
46

5,237
6,933
10,643

32
35
41

4,972
6,615
10,219

31
34
39

81,800
40,600
81,800 . 108,300
108,300 - 161,300

22,547
35,055
51,750

59
63
68

21,381
33,253
49,153

56
60
65

19,186
29,998
44,308

51
54
58

17,162
26,702
39,422

45
48
52

16,420
25,536
37,726

43
46
49

161,300 and over

¥•*
U>

0 _
2,300 •
4,400 6,500 •
8,700 11,800 -

$

87,790

70

83,603

66

75,048

60

66,982

53

63,696

50

$

0
0
294

ox
14
16

$

0
0
273

O ^ flca o f the Secretary o f the Treasury, O ffic e o f Tax A n a ly sis
y

OX
13
15

S

0
0
252

OX
12
14

$

0
0
231

OX
11
12

$

0
0
210

February 13, 1981

Coshered with present law, tax rate s are reduced approximately 5 percent In 1981, 15 percent in 1982, 25 percent in 1983, and 30 percent in 1984.




OX
10
11

Table 4
E ffe c t o f the A dm in istration 's Proposed
Tax Rate Reductions fo r 1981
D istributed by Adjusted Gross Income Class
(1981 Levels of Income)

Adjusted
gross
income
cla ss
($000)
Less than 3 .0
3 .0 5 .0
6 .0
5 .0 8 .0
6 .0 « 9 - 1 0 .0

|
;
*

Number
of
returns

: Present law
:ta x l i a b i l i t y I f

:
:

Change In tax 2 /
*

Amount
,)

( . thousands

Percentage
( . . percent . . . . )

1 0 ,9 3 3
7,363
3,406
6 ,6 2 3
6 ,2 1 0

-4 8
27
381
2 ,0 7 3
3 ,988

-1
-3 5
-4 8
-1 6 6
-2 5 6

3/
-1 2 9 .6
- 1 2 .6
-8 .0
-6 .4

1 0 .0 1 2 .5 1 5 .0 1 7 .5 2 0 .0 -

1 2 .5
1 5 .0
1 7 .5
2 0 .0
2 5 .0

7,164
6 ,3 0 3
5 ,6 0 2
5,2 8 1
9,3 7 7

7,425
9,117
10,570
12,610
28,615

-4 3 8
-5 1 4
-5 7 9
-6 9 2
-1 ,5 4 4

-5 .9
-5 .6
-5 .5
-5 .5
-5 .4

2 5 .0 3 0 .0 3 5 .0 4 0 .0 5 0 .0 -

3 0 .0
3 5 .0
4 0 .0
5 0 .0
6 0 .0

7,6 8 3
5,5 9 2
3,772
4 ,1 8 5
1 ,6 9 6

30,767
28,229
23,697
34,758
19,426

-1 ,5 9 0
- 1 ,4 5 3
-1 ,2 3 2
-1 ,8 0 1
-9 8 7

-5 .2
-5 .1
-5 .2
-5 .2
-5 .1

6 0 .0 7 0 .0
7 0 .0 8 0 .0
8 0 .0 9 0 .0
9 0 .0 - 1 0 0 .0
1 0 0 .0 - 2 0 0 .0

813
443
289
198
546

12,267
8,407
6,7 3 5
5 ,3 3 3
23,765

-6 0 6
-4 1 1
-336
-263
-9 6 4

-4 .9
-4 .9
-5 .0
-4 .9
-4 .1

200 and over

121

1 8,520

-682

-3 .4

93,599

$286,659

$ -1 4 ,5 9 8

T ota l

O ffic e of the Secretary of the Treasury
O ffic e of Tax A nalysis

-5 .1%
February 13, 1981

1 / Includes outlay portion o f earned income c r e d it.
2 / Tax ra tes are reduced approximately 5 percent.
To avoid fr a c tio n a l marginal r a te s ,
each current law tax rate is not reduced exactly 5 percent under th is b i l l .
A ls o ,
d e v ia tio n from a f l a t 5 percent reduction at a l l income le v e ls i s explained by
in te ra c tio n with the earned income c re d it and with the current law 50 percent
maximum tax on personal service income.
3 / C a lcu la tion o f a percentage reduction on a negative l i a b i l i t y i s not m eaningful.

Note: Details m not add to totals due to rounding.
ay




14

Table 5
E ffe c t o f the Adm inistration*s Proposed
Tax Rate Reductions for 1982
D istributed by Adjusted Gross Incone Class
(1981 Levels o f Incone)

A djusted
gross
income
c la s s

($000)
Less than 3.0

5.0
6 .0
8 .0
8*0— 10.0

3 .0 —
5*0—
6*0—

*
:
*

Number
of
returns
(.

: Present law
: tax l i a b i l i t y 1 /

:
:

Change in tax 2 /
Amount

thousands

*

Percentage

>) ( . . percent . . . . )

10,933
7,363
3,406
6,623
210

-48
27
381
2,073
3,988

-1
-70
-99
-386
-629

3/
-259.3
-2 6 .0
-1 8 .6
-1 5 .8

t,

1 0 .0 1 2 .5 1 5 .0 1 7 .5 2 0 .0 -

12.5
15.0
17.5
20.0
25.0

7,164
6,303
5,602
5,281
9,377

7,425
9,117
10,570
12,610
28,615

-1,115
-1,390
-1,627
-1,908
-4,243

-1 5 .0
-1 5 .2
-1 5 .4
-1 5 .1
-1 4 .8

2 5 .0 3 0 .0 3 5 .0 4 0 .0 5 0 .0 -

30.0
35.0
40.0
50.0
60 .0

7,683
5,592
3,772
4,185
1,696

30,767
28,229
23,697
34,758
19,426

-4,515
-4,169
-3,541
-5,209
-2,894

-1 4 .7
-1 4 .8
-1 4 .9
-1 5 .0
-1 4 .9

70.0
80.0
90.0
9 0 .0 - 100.0
1 0 0 .0 - 200.0

813
443
289
198
546

12,267
8,407
6,735
5,333
23,765

-1,817
-1,227
-977
-752
-2,902

-1 4 .8
-14.6
-14.5
-14.1
-1 2 .2

200 and over

121

18,520

-1,884

-10.2

93,599

$286,659

$-41,358

6 0 .0 7 0 .0 8 0 .0 -

T ota l

O ffic e o f the Secretary o f the Treasury
O ffic e o f Tax A n alysis

-14.47c
February 13f 1981

JL Includes ou tlay portion of earned income cred it*
/
2 / Tax r a te s are reduced approximately 15 percent.
To avoid fr a c tio n a l marginal
r a t e s , each current law tax rate i s not reduced e x a c tly 15 percent under th is
b ill.
A ls o , d eviation from a f l a t 15 percent reduction at a l l income le v e ls
i s explained by in te ra c tio n with the earned income c re d it and with the current
law 50 percent maximum tax on personal se rv ice income.
3 / C a lc u la tio n o f a percentage reduction on a negative l i a b i l i t y i s not meaningful.

Note: Details m not add to totals due to rounding.
ay




15

Table 6
E ffe c t o f the A dm in istration 's Proposed
Tax Rate Reductions fo r 1983
D istributed by Adjusted Gross Incone Class
('1981 Levels o f Income)

Adjusted
gross
income
c la ss
(S000)
Less than 3 .0
3 .0 5 .0
5 .0 6 .0
6 .0 8 .0
8 .0 1 0 .0

:
:
:
:

Number
of
returns
(.

Present lav
:
tax l i a b i l i t y 1 / :

Change in tax I t

thousands . . . )
10 ,933
7,363
3,406
6 ,6 2 3
6 ,2 1 0

\

Amount
,)

-4 8
27
381
2 ,0 7 3
3, >3 \

Percentage
( . . percent . . . . )

-2
-1 0 9
-1 6 7
-6 4 9
-1 ,0 5 5

3/
-4 0 3 .4
- 4 3 .8
-3 1 .3
- 2 6 .5

1 0 .0 1 2 .5 1 5 .0 1 7 .5 2 0 .0 -

1 2 .5
1 5 .0
1 7 .5
2 0 .0
2 5 .0

7,164
6,3 0 3
5,6 0 2
5,281
9,377

7,4 2 5
9,1 1 7
10,570
12,610
28,615

-1 ,8 5 4
-2 ,2 3 5
-2 ,5 7 9
-3 ,0 6 9
-6 ,8 0 5

- 2 5 .0
- 2 4 .5
- 2 4 .4
- 2 4 .3
- 2 3 .8

2 5 .0 3 0 .0 3 5 .0 4 0 .0 5 0 .0 -

3 0 .0
3 5 .0
4 0 .0
5 0 .0
6 0 .0

7,683
5 ,592
3,772
4,185
1,696

30,767
28,229
23,697
34,758
19,426

-7 ,1 7 4
-6 ,5 8 9
-5 ,5 6 4
-8 ,1 9 1
-4 ,5 8 5

- 2 3 .3
- 2 3 .3
-2 3 .5
- 2 3 .6
-2 3 .6

7 0 .0
6 0 .0 8 0 .0
7 0 .0 8 0 .0 9 0 .0
9 0 .0 - 1 0 0 .0
1 0 0 .0 - 2 0 0 .0

813
443
289
198
546

12,267
8,407
6,7 3 5
5,3 3 3
23,765

-2 ,8 8 5
-1 ,9 5 5
-1 ,5 7 4
-1 ,2 2 0
-4 ,9 4 5

-2 3 .5
- 2 3 .3
- 2 3 .4
- 2 2 .9
- 2 0 .8

200 and over

121

18,520

-3 ,1 8 3

- 1 7 .2

93,599

$286,659

$ -6 6 ,3 8 9

Total

O ffic e o f the Secretary of the Treasury
O ffic e o f Tax A n alysis

-2 3 .2 %
February 1 3 t 1981

1 / Includes outlay p ortion o f earned income c r e d it.
2 / Tax rates are reduced approximately 25 percent.
To avoid fr a c tio n a l marginal r a te s ,
each current law tax rate is not reduced e x actly 25 percent under th is b i l l .
A ls o ,
d eviation from a f l a t 25 percent reduction at a l l income le v e ls i s explained by
in te ra c tio n with the earned income cred it and with the current law 50 percent
maximum tax on personal se rv ice income.
V C alculation o f a percentage reduction on a negative l i a b i l i t y i s not m eaningful.

Note: Details m not add to totals due to rounding.
ay




16

Table 7
E ffe c t o f the A d m in istration 's Proposed
Tax Rate Reductions fo r 1984
D istributed by Adjusted Gross Income Class
(1981 Levels o f Income)

Adjusted
gross
income
c la s s
($000)
Less than 3 .0
3 .0 5 .0
5 .0 6 .0
6 .0 8 .0
8 .0 1 0 .0

*
*
|

Number
of
returns

Present law
:
:ta x l i a b i l i t y 1 / :

Change In tax 2 /
Percentage

Amount

( . thousands

.)

( . . percent . . . * )

10 ,9 3 3
7,3 6 3
3,406
6 ,6 2 3
6 ,2 1 0

-4 8
27
381
2 ,0 7 3
3 ,9 8 8

-3
-1 4 4
-2 1 5
-8 1 4
-1 ,3 0 9

3/
-5 3 3 .3
- 5 6 .4
- 3 9 .3
- 3 2 .8

1 0 .0 1 2 .5 1 5 .0 1 7 .5 2 0 .0 -

1 2 .5
1 5 .0
1 7 .5
2 0 .0
2 5 .0

7,164
6 ,3 0 3
5 ,6 0 2
5,2 8 1
9,3 7 7

7 ,4 2 5
9 ,1 1 7
1 0 ,5 7 0
1 2 ,6 1 0
28,6 1 5

-2 ,2 3 7
-2 ,6 4 8
-3 ,0 5 6
-3 ,6 4 0
- 8 ,1 2 2

-3 0 .1
- 2 9 .0
- 2 8 .9
- 2 8 .9
- 2 8 .4

2 5 .0 3 0 .0 3 5 .0 4 0 .0 5 0 .0 -

3 0 .0
3 5 .0
4 0 .0
5 0 .0
6 0 .0

7 ,6 8 3
5,5 9 2
3,772
4 ,1 8 5
1 ,6 9 6

3 0,767
28 ,2 2 9
23,697
34,758
1 9 ,426

-8 ,5 6 3
-7 ,8 2 6
-6 ,5 5 1
-9 ,5 2 4
-5 ,2 7 5

- 2 7 .8
-2 7 .7
- 2 7 .6
- 2 7 .4
- 2 7 .2

6 0 .0 7 0 .0
8 0 .0
7 0 .0 9 0 .0
8 0 .0 9 0 .0 - 1 0 0 .0
1 0 0 .0 - 2 0 0 .0

813
443
289
198
546

12,267
8 ,4 0 7
6 ,7 3 5
5 ,3 3 3
23,7 6 5

-3 ,3 2 0
-2 ,2 5 5
- 1 ,8 1 9
-1 ,4 1 2
- 5 ,7 9 3

- 2 7 .1
- 2 6 .8
- 2 7 .0
-2 6 .5
- 2 4 .4

200 and over

121

1 8 ,5 2 0

- 3 ,7 6 2

- 2 0 .3

9 3 ,5 9 9

$286,659

$ -7 8 ,2 8 5

T otal

O ffic e o f the Secretary of the Treasury
O ffic e o f Tax A n alysis

-2 7 .3 %
February 13, 1981

1 / Includes outlay portion o f earned income c r e d it .
2 / Tax ra te s are reduced approximately 30 percent. To avoid fr a c tio n a l marginal r a te s ,
*
each current law tax rate i s not reduced e x a c tly 30 percent under th is b i l l .
A lso ,
d eviation from a f l a t 30 percent reduction at a l l income le v e ls is explained by
in te ra c tio n with the earned income cred it arid with the current law 50 percent maximum
tax on personal se rv ice income.
3 / C alculation of a percentage reduction on a negative l i a b i l i t y i s not m eaningful.

Note: Details m not add to- totals due to rounding.
ay




17

T a b le

8

Effect of the Administration's Proposed
Tax Rate Reductions for 1981
Single Individual

(d o lla r s )
Vage
income

:
:

Tax l i a b i l i t y 1 /
Present
la v

j

: Adm inistration's :
:
proposal 2 /
:

Change in tax l i a b i l i t y

,.)

( ........................................
$

5*000

\

Amount

$

250

$

233

$

Percentage
( . . percent . . . . )

-1 7

-6 .8 %

1 0 ,0 0 0

1 ,177

1 ,110

-6 7

-5 .7

1 5 ,0 0 0

2 ,0 4 7

1,942

-1 0 5

-5 .1

2 0 ,0 0 0

3,115

2,954

-161

-5 .2

2 5 ,0 0 0

4 ,3 6 4

4,126

-2 3 8

-5 .5

3 0 ,0 0 0

5 ,7 1 8

5 ,403

-3 1 5

-5 .5

4 0 ,0 0 0

8 ,8 8 6

8,417

-4 6 9

-5 .3

5 0 ,0 0 0

12,559

11,936

-6 2 3

-5 .0

100 ,0 0 0

31,792

31,135

-657

-2 .1

2 0 0 ,0 0 0

70,292

6 9,635

-6 5 7

-0 .9

10 0 ,0 0 0

35,346

33,591

-1 ,7 5 5

-5 .0

2 0 0 ,0 0 0

88,457

83,924

-4 ,5 3 3

-5 -1

Property income:

O ffic e o f the Secretary o f the Treasury

February 13 $ 1981

Office of Tax Analysis
1/ Assumes deductible expenses equal to 23 percent of gross income.
2/ Tax rates reduced approximately 5 percent ■




18

Table 9

Effect of the Administration's Proposed
Tax Rate Reductions for 1981

Four-person Family

(d o lla r s )
Wage
income

:
:

Tax l i a b i l i t y 1 /
Present
lav

)

: Adm inistration*s :
:
proposal 2 /

Change in tax l i a b i l i t y
Amount

Percentage
>.)

( ......................................
$

5 ,0 0 0

$

-5 0 0

$

-5 0 0

$

0

( . . percent . . . . )
0.0%

1 0 ,0 0 0

374

348

-2 6

-7 .0

1 5 ,0 0 0

1,2 3 3

1,158

-7 5

-6 .1

2 0 ,0 0 0

2,0 1 3

1,899

-1 1 4

-5 .7

2 5 ,0 0 0

2,901

2 ,748

-1 5 3

-5 .3

3 0 ,0 0 0

3,917

3,726

-1 9 1

-4 .9

4 0 ,0 0 0

6 ,3 1 2

5 ,9 8 8

-3 2 4

* 5 .1

5 0 ,0 0 0

9 ,3 2 3

8,845

-4 7 8

-5 .1

1 0 0 ,0 0 0

27,878

26,958

-9 2 0

-3 .3

2 0 0 ,0 0 0

66,378

6 5 ,4 5 3

-9 2 0

-1 .4

1 0 0 ,0 0 0

28 ,3 1 8

2 6 ,918

-1 ,4 0 0

-4 .9

2 0 0 ,0 0 0

75,448

71,738

-3 ,7 1 0

-4 .9

Property income:

O ffic e of the Secretary o f the Treasury

’

Office of Tax Analysis
1/ Assumes deductible expenses equal to 23 percent of gross Income.
2/ Tax rates reduced approximately 5 percent.




19

February 1 3 , 1981

Table 10
Effect of the Administration's Proposed
Tax Rate Reductions for 1982
Single Individual

(d o lla r s )
Wage
income

:
:

Tax l i a b i l i t y 1 /
Present
law

( ........................................
$

5 ,0 0 0

$

j

: A d m inistration's :
:
proposal 2 /
:
d olla rs .................................. .

250

$

216

Change in tax l i a b i l i t y
Amount

|

Percentage

>•) ( . . percent . . . . )
$

-34

-1 3 .6 %

1 0 ,0 0 0

1,177

997

-1 8 0

-1 5 .3

1 5 ,0 0 0

2,047

1,7 3 1

-3 1 6

- 1 5 .4

2 0 ,0 0 0

3 ,115

2,645

-4 7 0

- 1 5 .1

2 5 ,0 0 0

4,3 6 4

3,716

-6 4 8

- 1 4 .8

3 0 ,0 0 0

5,7 1 8

4,869

-849

- 1 4 .8

4 0 ,0 0 0

8,886

7,542

-1 ,3 4 4

- 1 5 .1

5 0 ,0 0 0

12,559

10,676

-1 ,8 8 3

- 1 5 .0

1 0 0 ,0 0 0

31,792

29,376

-2 ,4 1 6

-7 .6

2 0 0 ,0 0 0

70,292

67,876

-2 ,4 1 6

-3 .4

1 0 0 ,0 0 0

35,346

30,188

-5 ,1 5 8

- 1 4 .6

2 0 0 ,0 0 0

88,457

75,636

-1 2 ,8 2 1

-1 4 .5

Property income:

O ffic e o f the Secretary o f the Treasury

February 13 f 1981

"Office of Tax Analysis
1/ Assumes deductible expenses equal to 23 percent of gross income.
27 Tax rates reduced approximately 15 percent-




20

Table 11

Effect of the Administration's Proposed
Tax Rate Reductions for 1982
Four-person Family

(d o lla r s )
Wage
income

:
:

Tax l i a b i l i t y
Present
lav

1/

|

: A d m in istra tio n 's :
:
proposal 2 /
:

Change in *ta x l i a b i l i t y
Percentage

Amount
.)

( ........................................
$

5 ,0 0 0

$

-5 0 0

$

-5 0 0

$

0

( . . percent

o.oz

1 0 ,0 0 0

374

322

-5 2

-1 3 .9

1 5 ,0 0 0

1 ,2 3 3

1 ,0 4 8

-1 8 5

-1 5 .0

2 0 ,0 0 0

2 ,0 1 3

1 ,7 1 3

-3 0 0

-1 4 .9

2 5 ,0 0 0

2,9 0 1

2 ,4 8 6

-4 1 5

- 1 4 .3

3 0 ,0 0 0

3,917

3 ,3 6 3

-554

- 1 4 .1

4 0 ,0 0 0

6 ,3 1 2

5 ,3 9 1

-9 2 1

- 1 4 .6

5 0 ,0 0 0

9 ,3 2 3

7 ,9 4 0

-1 ,3 8 3

- 1 4 .8

1 0 0 ,0 0 0

27,878

2 4,535

-3 ,3 4 3

- 1 2 .0

2 0 0 ,0 0 0

66,3 7 8

62,7 5 9

-3 ,6 1 9

-5 .5

1 0 0 ,0 0 0

2 8 ,3 1 8

24,347

-3 ,9 7 1

- 1 4 .0

2 0 0 ,0 0 0

75*448

6 4 ,7 3 9

-1 0 ,7 0 9

-1 4 .2

Property income:

O ffic e o f the Secretary of the Treasury

February 1 3 , 1981

Office of Tax Analysis
1/ Assumes deductible expenses equal to 23 percent of gross Income.
2/ Tax rates reduced approximately 15 percent.




21

Table 12
Effect of the Administration's Proposed
Tax Rate Reductions for 1983
Single Individual

(d o lla r s )
Wage
income

:
:

Tax l i a b i l i t y 1 /
Present
law

|

.'Adm inistration's :
:
proposal 2 /
:

Change in tax l i a b i l i t y
•

» .)

( ........................................
$

5 ,0 0 0

|

Amount

$

250

$

193

$

-5 7

Percentage
( . . percent .
-2 2 .8 %

1 0 ,0 0 0

1,177

874

-3 0 3

- 2 5 .7

1 5 ,0 0 0

2,047

1,53^

-516

-2 5 .2

2 0 ,0 0 0

3,115

2,334

-7 8 1

-2 5 .1

2 5 ,0 0 0

4,364

3,275

-1 ,0 8 9

-2 5 .0

3 0 ,0 0 0

5,7 1 8

4,3 0 3

-1 ,4 1 5

-2 4 .7

A 0 ,000

8,886

6,701

-2 ,1 8 5

- 2 4 .6

5 0 ,0 0 0

12,559

9,547

-3 ,0 1 2

-2 4 .0

1 0 0 ,0 0 0

31,792

27,029

-4 ,7 6 3

- 1 5 .0

2 0 0 ,0 0 0

70,292

65,459

-4 ,8 3 3

-6 .9

1 0 0 ,0 0 0

35,346

26 ,9 3 3

-8 ,4 1 3

-2 3 .8

2 0 0 ,0 0 0

88,457

67 ,2 9 3

-2 1 ,1 6 4

-2 3 .9

Property income:

O ffic e o f the Secretary o f the Treasury

February 13, 1981

Office of Tax Analysis
1/ Assumes deductible expenses equal to 23 percent of gross income.
2/ Tax rates reduced approximately 25 percent .




22

Table 13

Effect of the Administration's Proposed
Tax Rate Reductions for 1983
Four-person Family

(d o lla r s )
Wage
Income

:
:

j

Tax l i a b i l i t y 1 /
Present
lav

: Adm inistration*s :
:
proposal 2 /
:

Change In tax l i a b i l i t y

..)

( ........................................
$

5 ,0 0 0

|

Amount

$

-5 0 0

$

-5 0 0

S

0

Percentage
( . . percent . . . . )

o.oz

1 0 ,0 0 0

374

291

-8 3

- 2 2 .2

1 5 ,0 0 0

1,233

952

-2 8 1

- 2 2 .8

2 0 ,0 0 0

2 ,0 1 3

1 ,5 4 9

-4 6 4

-2 3 .1

2 5 ,0 0 0

2 ,901

2,2 4 4

-6 5 7

-2 2 .6

3 0 ,0 0 0

3,917

3,045

-8 7 2

- 2 2 .3

4 0 ,0 0 0

6 ,312

4,8 6 2

- 1 ,4 5 0

- 2 3 .0

5 0 ,0 0 0

9 ,3 2 3

7,1 5 4

-2 ,1 6 9

- 2 3 .3

1 0 0 ,0 0 0

27,878

2 2 ,045

-5 ,8 3 3

-2 0 .9

2 0 0 ,0 0 0

66,378

5 8 ,1 7 9

- 8 ,1 9 9

- 1 2 .4

1 0 0 ,0 0 0

2 8 ,3 1 8

21,877

-6 ,4 4 1

- 2 2 .7

2 0 0 ,0 0 0

7 5 ,448

5 7 ,9 8 3

-1 7 ,4 6 5

-2 3 .1

Property income:

O ffic e o f the Secretary o f the Treasury

February 13* 1981

Office of Tax Analysis
1/ Assumes deductible expenses equal to 23 percent of gross Income.
2/ Tax rates reduced approximately 25 percent.




23

Table 14
Effect of the Administration's Proposed
Tax Rate Reductions for 1984
Single Individual

(d o lla r s )
Wage
income

:
:

Tax l i a b i l i t y 1 /
Present
law

( ........................................
$

250

$

176

Percentage

Amount
.)
1

5 ,0 0 0

: A dm inistration's :
:
proposal 2 /
:
d o lla rs ..................................

Change In tax l i a b i l i t y

<
/>

$

\

( . . percent ••••)
- 2 9 . 6Z

1 0 ,0 0 0

1,177

812

-3 6 5

- 3 1 .0

1 5 ,0 0 0

2,047

1,4 6 9

-5 7 8

- 2 8 .2

2 0 ,0 0 0

3,115

2,234

-8 8 1

- 2 8 .3

2 5 ,0 0 0

4,364

3,136

- 1 ,2 2 8

- 2 8 .1

3 0 ,0 0 0

5,718

4,1 2 6

-1 ,5 9 2

- 2 7 .8

4 0 ,0 0 0

8,886

6,414

-2 ,4 7 2

- 2 7 .8

5 0 ,0 0 0

12,559

9 ,1 0 6

-3 ,4 5 3

- 2 7 .5

1 0 0 ,0 0 0

31,792

2 5,818

-5 ,9 7 4

- 1 8 .8

2 0 0 ,0 0 0

70,292

6 3 ,9 1 3

-6 ,3 7 9

-9 .1

1 0 0 ,0 0 0

35,346

25,726

-9 ,6 2 0

- 2 7 .2

200 ,0 0 0

88,457

6 3 ,8 1 3

-2 4 ,6 4 4

- 2 7 .9

Property income:

O ffic e o f the Secretary o f the Treasury

February 1 2 , 1981

Office of Tax Analysis
1/ Assumes deductible expenses equal to 23 percent of gross income.
2/ Tax rates reduced approximately 30 percent.




24

Table 15

Effect of the Administration's Proposed
Tax Rate Reductions for 1984
Four-person Family

(d o lla r s )
Wage
income

:
:

Tax l i a b i l i t y I t
Present
lav

[

: Adm inistration1s :
:
proposal 2 /
:

Change in tax l i a b i l i t y
Amount

Percentage
,.)

( .....................................
S

5 ,0 0 0

$

-5 0 0

$

• sro

$

0

( . . percent ••••)
o .o z

1 0 ,0 0 0

374

265

-1 0 9

- 2 9 .1

1 5 ,0 0 0

1 ,2 3 3

876

-3 5 7

- 2 8 .9

2 0 ,0 0 0

2,013

1 ,4 3 5

-5 7 e

- 2 8 .7

2 5 ,0 0 0

2, 9C1

2,092

-8 0 9

- 2 7 .9

3 0 ,0 0 0

3,917

2,854

-1 ,0 6 3

-2 7 .1

4 0 ,0 0 0

6,312

4,5 9 5

-1 ,7 1 7

- 2 7 .2

5 0 ,0 0 0

9 ,3 2 3

6 ,8 0 9

-2 ,5 1 4

- 2 7 .0

1 0 0 ,0 0 0

27,876

21,009

-6 ,8 6 9

-2 4 .6

200 ,0 0 0

66,3 7 6

5 5 ,6 0 3

-1 0 ,7 7 5

-1 6 .2

1 00,000

28,318

20,849

-7 ,4 6 9

-2 6 .4

200 ,0 0 0

75,448

55,4 1 5

-2 0 ,0 3 3

-2 6 .6

Property income:

O ffice o f the Secretary of the Treasury

February 1 2 , 1981

Office of Tax Analysis
1/ Assum deductible expenses equal to 23 percent of gross income.
es
2/ Tax rates reduced approximately 30 percent.




25

ACCELERATED COST RECOVERY SYSTEM
Present

Law

Personal P rop erty.
Un:ler p r e s e n t l a w , t a x p a y e r s may
c la im d e p r e c i a t i o n d e d u c tio n s for t a n g ib le p e rso n a l p r o p e r ty
s u c h a s m a c h i n e r y ana e q u i p m e n t u s e d i n a t r a d e o r b u s i n e s s ,
i n c l u d i n g f o r l e a s e or r e n t a l .
These d e d u c t i o n s a rc sp read
o v e r th e e s t i m a t e d " u s e f u l l i f e " w h ich i s d e t e r m i n e d by th e
p a r t i c u l a r " f a c t s and c i r c u m s t a n c e s " o f t h e a n t i c i p a t e d u s e
o f t h e p r o p e r t y o r a c c o r d i n g t o a s y s t e m o f g u i d e l i n e s known
a s the A s s e t D e p r e c ia t io n Range, or " A t P " , s y s te m .
A t a x p a y e r c l a i m i n g d e p r e c i a t i o n on t h e b a s i s o f f a c t s
a n d c i r c u m s t a n c e s m u s t e s t i m a t e t h e u s e f u l l i f e a nd s a l v a g e
v a l u e f o r each item o f d e p r e c i a b l e p r o p e r t y .
These e s t i m a t e s ,
a r e s u b j e c t to e x a m in a tio n by a u d i t i n g a g e n t s o f th e I n t e r n a l
Revenue S e r v i c e .
T h e ADR s y s t e m , e s t a b l i s h e d i n 1 9 7 1 , s e t s o u t u s e f u l
l i v e s f o r c l a s s e s o f a s s e t s b a s e d upon t h e a c t i v i t y i n w h i c h
t h e a s s e t s a r e used ( f o r e x a m p l e , m i n i n g , or m a n u f a c t u r e o f
m a c h in e r y ) or a c c o r d in g to the ty p e o f a s s e t
(e . g . ,
a u t o m o b ile s or o f f i c e f u r n i t u r e ) .
A ta x p a y e r e l e c t i n g to use
t h e ADR s y s t e m ma y r e l y o n t h e s e l i v e s w i t h o u t r e g a r d t o t h e
p a r t i c u l a r f a c t s a nd c i r c u m s t a n c e s .
F urther, taxpayers are
p e r m itte d to choose u s e fu l l i v e s w ith in a range exten din g
fro m 20 p e r c e n t s h o r t e r t o 20 p e r c e n t l o n g e r than th e
e s t a b l i s h e d g u i d e l i n e fo r each c l a s s .
W h e t h e r u s e f u l l i v e s a r e d e t e r m i n e d b y f a c t s and
c i r c u m s t a n c e s o r b y ADR g u i d e l i n e s , t h e t a x p a y e r a l s o h a s a
c h o i c e o f the "m eth od " o f d e p r e c i a t i o n .
D epreciation
d e d u c t i o n s may be c o m p u te d r a t a b l y o v e r t h e u s e f u l l i f e
(the
s t r a i g h t - l i n e method) or c e r t a i n a c c e l e r a t e d m ethods (su ch a s
d e c l i n i n g b a l a n c e o r s u m - o f - y e a r s - d i g i t s ) may b e u s e d .
A c c e l e r a t e d m ethods a l l o w l a r g e r d e d u c t i o n s in th e e a r l i e r
y e a rs o f the u se fu l l i f e
(and s m a l l e r d e d u c t i o n s l a t e r ) .
Whe n p e r s o n a l p r o p e r t y i s r e t i r e d , s u c h a s b y s a l e o r
e x c h a n g e , any g a in or l o s s , a s measured by the d i f f e r e n c e
b e t w e e n t h e a m o u n t r e a l i z e d and t h e r e m a i n i n g u n d e p r e c i a t e d
( o r Ba d j u s t e d " ) b a s i s , i s u s u a l l y r e c o g n i z e d i m m e d i a t e l y a s
o r d i n a r y incom e.
Any g a i n in e x c e s s o f p r i o r d e p r e c i a t i o n
d e d u c t i o n s w i l l g e n e r a l l y be ta x e d a t th e c a p i t a l g a i n s
rates.
L o s s e s r e a l i z e d are a llo w ed as o r d in a r y or c a p i t a l
d e p e n d i n g on t h e n a t u r e and u s e o f t h e a s s e t .
Real E s t a t e .
P r e s e n t law a l s o a llo w s d e p r e c i a t i o n
d e d u c tio n s for b u sin ess b u ild in g s .
A set o f gu id elin e
p e r i o d s o r f a c t s and c i r c u n s t a n c e s may b e u se d t o e s t a b l i s h
recovery periods.
G u i d e l i n e s ran ge from 2 5 y e a r s f o r farm
b u i l d i n g s to 60 y e a r s fo r w areh ou ses.




26

I n s t e a d o f e s t i m a t i n g t h e o v e r a l l u s e f u l l i f e a nd
s a l v a g e v a l u e o f a b u i l d i n g , t a x p a y e r s may s e p a r a t e l y
d e p r e c i a t e i t s v a r io u s com ponents (e . g . , th e b u ild in g s h e l l ,
w ir in g , plu m b in g, r o o f , c e i l i n g , f l o o r i n g ) ,
i t i s not
un co mmo n f o r a s i n g l e b u i l d i n g t o b e d i v i d e d i n t o m o r e t h a n
100 com pon en ts.
New r e s i d e n t i a l r e n t a l b u i l d i n g s ma y b e
d e p r e c i a t e d under th e d e c l i n i n g b a l a n c e method a t a r a t e o f
up t o 2 0 0 p e r c e n t o f t h e s t r a i g h t - l i n e r a t e ( o r t h e
s u m - o f - t h e - y e a r s d i g i t s m e t h o d may b e u s e d t o g i v e
a p p r o x i m a t e l y t h e s a me r e s u l t ) .
O t h e r new b u i l d i n g s ma y b e
d e p r e c i a t e d u s i n g 1 5 0 p e r c e n t d e c l i n i n g b a l a n c e and u s e d
r e s i d e n t i a l p r o p e r t i e s ma y u s e 1 2 5 p e r c e n t d e c l i n i n g b a l a n c e .
E x p e n d i t u r e s f o r t h e r e h a b i l i t a t i o n o f c e r t a i n lo w income
h o u s i n g a nd c e r t i f i e d h i s t o r i c s t r u c t u r e s m a y b e w r i t t e n - o f f
over 5 y ea rs.
Upon t h e d i s p o s i t i o n o f a b u i l d i n g , t h e t a x p a y e r i s
r e q u i r e d t o r e c o g n i z e a s o r d i n a r y incom e any amount o f g a i n
u p t o t h e d i f f e r e n c e b e t w e e n t h e a c c e l e r a t e d d e p r e c i a t i o n and
t h e d e p r e c i a t i o n d e d u c t i o n s a l l o w a b l e under th e s t r a i g h t l i n e
m ethod.
An e x c e p t i o n i s p r o v i d e d f o r c e r t a i n t y p e s o f
s u b s i d i z e d low-inc.orae h o u s i n g .
G a i n s i n e x c e s s o f t h e amount
r e c o g n i z e d a s o r d i n a r y income a r e t r e a t e d a s c a p i t a l g a i n s .
As w i t h l e a s e d p e r s o n a l p r o p e r t y , r e a l e s t a t e d e p r e c i a t i o n in
e x c e s s o f s t r a i g h t l i n e i s c o n s i d e r e d an i t e m o f t a x
p r e f e r e n c e f o r p u r p o s e s o f t h e a d d - o n minimum t a x .
R elated Investm ent C r e d it R u le s .
The i n v e s t m e n t c r e d i t
i s l e s s t h a n 1 0 p e r c e n t f o r e l i g i b l e p r o p e r t y w i t h an
e x p e c te d u s e f u l l i f e o f l e s s than 7 y e a r s .
No c r e d i t i s
allow ed i f the expected u s e fu l l i f e
i s l e s s than 3 y e a r s .
If
the u s e fu l l i f e
i s b e t w e e n 3 and 5 y e a r s , a c r e d i t o f 3 - 1 / 3
p e r c e n t a p p l i e s ; i f the u s e fu l l i f e
i s b e t w e e n 5 and 7 y e a r s ,
the c r e d it i s 6 - 2 /3 p e r c e n t.
The i n v e s t m e n t c r e d i t i s n o t
g e n e r a lly a v a ila b le for real e s t a t e .
C u r r e n t la w a l s o r e q u i r e s t h e t a x p a y e r to r e p a y , or
" r e c a p t u r e , " s o m e o r a l l o f t h e i n v e s t m e n t c r e d i t when
p r o p e r t y i s d i s p o s e d o f b e f o r e t h e end o f t h e a n t i c i p a t e d
useful l i f e .
The e n t i r e c r e d i t i s r e c a p t u r e d i f a p r o p e r t y
i s h e ld l e s s than 3 y e a r s .
I f th e p r o p e r t y i s h e l d l e s s than
5 y e a r s , any c r e d i t o f more th a n 3 - 1 / 3 p e r c e n t i s r e c a p tu r e d
a n d , s i m i l a r l y , c r e d i t ta k en in e x c e s s o f 6 - 2 / 3 p e r c e n t i s
re ca p tu red for d i s p o s i t i o n s b e fo r e the seven th y e a r .




27

R easons f o r Change
A c c e l e r a t i o n o f c a p i t a l a ll o w a n c e s i s a key measure to
improve i n c e n t i v e s fo r b u s i n e s s in v e stm e n t a s a fo u n d a tio n
f o r i n c r e a s e d p r o d u c t i v i t y and s u s t a i n e d e c o n o m i c g r o w t h .
In
r e ce n t y e a r s , the r e a l v a lu e o f d e p r e c ia tio n allow an ces has
b e e n g r e a t l y e r o d e d b y i n f l a t i o n a t t h e s a me t i m e t h a t t h e
c o u n t r y ' s c a p i t a l n e e d s h a v e beco m e more u r g e n t .
Adoption o f
t h i s p r o p o sa l w i l l reduce s u b s t a n t i a l l y th e burden o f F ed eral
i n c o m e t a x e s o n t h e r e t u r n t o i n v e s t i n g i n b u s i n e s s p l a n t a nd
equipm ent.
T o g e t h e r w i t h o t h e r m e a s u r e s t o e n c o u r a g e w o r k and
s a v i n g a nd t o r e d u c e t h e b u r d e n s o f F e d e r a l r e g u l a t i o n and
govern m en t s p e n d in g , t h i s l e g i s l a t i o n w i l l p r o v id e the
c o n d i t i o n s fo r in c r e a s e d c a p i t a l in v e stm e n t needed to p r o v id e
j o b s and i m p r o v e t h e U . S . c o m p e t i t i v e p o s i t i o n i n w o r l d
m arkets.
T h e l o n g - t e r m e c o n o m i c s t r e n g t h o f t h e c o u n t r y and
th e f u t u r e sta n d a rd o f l i v i n g o f i t s p e o p le depend
i m p o r t a n t l y on t h i s p r o g r a m .
The A c c e l e r a t e d C o s t R e c o v e r y S y ste m w i l l a l s o r e d u c e
t h e b u r d e n o f a c c o u n t i n g a nd t a x p l a n n i n g f o r t a x p a y e r s a nd
w i l l r e m o v e s o u r c e s o f d i s p u t e b e t w e e n t a x p a y e r s a nd t h e
F ed eral Government.
T h i s s y s t e m w i l l e l i m i n a t e muc h o f t h e
c o m p l e x i t y o f d e p r e c i a t i o n r u l e s t h a t h a v e b u i l t up i n l a y e r s
o v e r t h e y e a r s t h r o u g h c h a n g e s i n l a w , r e g u l a t i o n s , a nd
ad m in istrative p r a c tic e .
T he p r o p o s e d s y s t e m m a k e s a c l e a n
break w ith most o f p r e se n t c o s t recovery p r o v is io n s and, y e t ,
i s b u i l t o n f a m i l i a r c o n c e p t s and d e f i n i t i o n s .
I n t h e new
s y s t e m , c l a s s e s o f c a p i t a l a s s e t s a r e b r o a d a nd w e l l d e f i n e d ;
c o s t r e c o v e r y p e r i o d s a n d a c c o u n t i n g r u l e s a r e c e r t a i n a nd
stan d ard ized .




28

G en era l E x p la n a tio n
The A c c e l e r a t e d C o s t R e c o v e r y System w i l l p r o v i d e f o r
f a s t e r w r i t e - o f f o f c a p i t a l e x p e n d i t u r e s by means o f
s i m p l i f i e d and s t a n d a r d i z e d r u l e s .
The s y s t e m w i l l r e p l a c e
th e p r e s e n t com plex p r o v i s i o n s fo r d e t e r m i n a t io n o f
d e p r e c ia tio n allow an ces.
It su b stitu te s e a s ily identifed
c l a s s e s , each w ith a standard sc h e d u le o f d e d u c tio n s to be
taken over a fix e d reco v ery p e r io d .
T he p r o p o s e d l e g i s l a t i o n
a d o p t s t h e n o w - f a m i l i a r 1 0 - 5 - 3 c o n c e p t f o r m a c h i n e r y and
e q u i p m e n t u se d in b u s i n e s s and f o r o w n e r - o c c u p i e d s t r u c t u r e s
u s e d f o r m a n u f a c t u r i n g and d i s t r i b u t i o n .
In a d d i t i o n ,
a u d i t - p r o o f l i v e s a r e p r o v i d e d f o r two c l a s s e s o f r e a l
estate.
B r i e f d e s c r i p t i o n s o f t h e 3 - , 5 - , a nd 1 0 - y e a r
c l a s s e s summarize th e e s s e n t i a l s o f th e s y s t e m .
o

3 -y ea r p r o p e r ty .
T h i s c l a s s c o n s i s t s o f a u t o s and
l i g h t t r u c k s p l u s m a c h i n e r y and e q u i p m e n t u s e d i n
r e s e a r c h and d e v e l o p m e n t a c t i v i t i e s .
Expenditures
f o r t h e s e a s s e t s w i l l be w r i t t e n - o f f in t h r e e y e a r s
a c c o r d i n g t o an a c c e l e r a t e d s c h e d u l e —
33 p e r c e n t in
t h e f i r s t y e a r , 4 5 p e r c e n t in t h e s e c o n d , and 2 2
p e r c e n t in th e t h i r d .
An i n v e s t m e n t c r e d i t o f 6
p e r c e n t w i l l a l s o a p p l y t o t h i s c l a s s , an i n c r e a s e o f
2 - 2 / 3 p e r c e n ta g e p o i n t s over th e p r e s e n t law fo r
p r o p e r t y w r i t t e n - o f f in t h r e e y e a r s .

o

5-year p rop erty .
A l l o t h e r o u t l a y s f o r m a c h i n e r y a nd
eq u ip m en t, in c lu d in g p u b li c u t i l i t y p r o p e r ty w ith
p r e s e n t g u i d e l i n e l i v e s o f 16 y e a r s or l e s s , a re
a s s ig n e d to a 5 -y e a r c l a s s .
A fter a ph ase-in p erio d ,
a d d i t i o n s to t h i s c l a s s w i l l be w r i t t e n - o f f a cco rd in g
t o an a c c e l e r a t e d 5 - y e a r s c h e d u l e —
20 p e r c e n t in
t h e y e a r a c q u i r e d , and t h e n i n s u c c e e d i n g y e a r s 32
p e r c e n t , 24 p e r c e n t , 1 6 p e r c e n t , and 8 p e r c e n t o f
origin al c o st.
The f u l l 1 0 p e r c e n t i n v e s t m e n t c r e d i t
w i l l be a llow ed fo r t h i s c l a s s .

o

10-year p r o p e r ty .
Factory b u ild in g s , r e t a il s to r e s ,
and w a r e h o u s e s u s e d b y t h e i r o w n e r s , and p u b l i c
u t i l i t y p r o p e r t y fo r which p r e s e n t g u i d e l i n e s e xce ed
18 y e a r s w i l l be w r i t t e n - o f f o v e r 10 y e a r s .
The
annual sequence o f d e d u ctio n s for t h i s c l a s s i s a ls o
a ccelera ted —
10 p e r c e n t , 18 p e r c e n t , 16 p e r c e n t , 14
p e r c e n t , 12 p e r c e n t , 10 p e r c e n t , 8 p e r c e n t , 6
p e r c e n t , 4 p e r c e n t , and 2 p e r c e n t .
As u n d e r p r e s e n t
l a w , th e 10 p e r c e n t i n v e s t m e n t c r e d i t a p p l i e s to
p u b l i c u t i l i t y p r o p e r t y in t h i s c l a s s , b u t i s n o t
g e n e r a lly a v a ila b le for re a l p ro p e rty .




29

real

A u d it-p roof
estate.

lives

are

prescribed

for

other

cla sses

of

°

o

a lik e
value

15-year l i f e .
N o n -re sid e n tia l s tr u c tu r e s not
i n c l u d e d i n t h e 1 0 - y e a r c l a s s a nd l o w - i n c o m e r e n t a l
h o u sin g w i l l be w r i t t e n - o f f in 15 y e a r s by the
s t r a i g h t - l i n e method.
T his treatm ent a p p lie s to each
b u ild in g as a com posite.
18-year l i f e .
Other r e s i d e n t i a l s t r u c t u r e s fo r
r e n t a l , such a s apartm ent b u i l d i n g s , w i l l each be
w r i t t e n - o f f , a s a c o m p o s i t e , o v er 18 y e a r s a c c o r d in g
to the s t r a i g h t - l i n e m ethod.

U nlike p rese n t la w , a l l o f
t o new a n d u s e d p r o p e r t y ,
is required.

the
and

c o s t r e c o v e ry r u l e s app ly
no e s t i m a t e o f s a l v a g e

Accounting r u l e s .
An a s s e t a c q u i r e d a t a n y t i m e i n t h e
t a x y e a r i s a d d e d t o t h e " v i n t a g e " a c c o u n t f o r i t s c l a s s and
kept in t h a t a cc o u n t u n t i l f u l l y w r i t t e n - o f f or r e t i r e d .
A
" h a l f - y e a r c o n v e n tio n " for the year o f a c q u i s i t i o n i s
b u i l t - i n to the r e c o v e r y s c h e d u le .
Gain or l o s s i s g e n e r a l l y
r e c o g n i z e d on d i s p o s i t i o n o f an a s s e t .
G a i n s on p r o p e r t y f o r
c l a s s e s w i t h a c c e l e r a t e d r e c o v e r y ( t h e 3 - , 5 - , and 1 0 - y e a r
c l a s s e s ) w i l l g e n e r a l l y be r e c o g n i z e d a s o r d i n a r y income t o
the e x t e n t o f p r i o r a l l o w a n c e s .
H o w e v e r , no o r d i n a r y i n c o m e
r e c a p t u r e a p p l i e s t o t h e 1 5 - a nd 1 8 - y e a r , s t r a i g h t - l i n e
recovery c la s s e s .
T a x p a y e r s must p a y b a c k , or " r e c a p t u r e , "
a portion o f
t h e i n v e s t m e n t c r e d i t i n t h e c a s e o f e a r l y r e t i r e m e n t s up t o
t h e f i f t h y e a r t h a t an a s s e t i s h e l d .
In t h e s e c a s e s , t h e
t a x p a y e r may k e e p a c r e d i t o f 2 p e r c e n t f o r e a c h f u l l y e a r
t h e p r o p e r t y i s h e l d , up t o t h e a m o u n t o f c r e d i t o r i g i n a l l y
claim ed .
P h ase-in p e r io d .
T he 5 - , 1 0 - , a n d 1 5 - y e a r r e c o v e r y
p e rio d are p h a sed -in over a 5 -y e a r p e rio d .
However, the
i n v e s t m e n t c r e d i t r u l e s , t h e 3 - y e a r r e c o v e r y p e r i o d , and t h e
1 8 -y e a r a u d i t - p r o o f l i v e s w i l l b e g in w ith the e f f e c t i v e d a t e .
E ffective

Date

The A c c e l e r a t e d C o s t R e c o v e ry
f o r p r o p e r t y a c q u ir e d or p l a c e d in
1980.




30

System w i l l be e f f e c t i v e
s e r v i c e a f t e r December 3 1 ,

A ccelerated

Cost

Technical

Recovery

System

F xplanation

SumTT'ary

The
P d jr.in istr a tio n 's
A ccelerated
Cost
Recovery
System
("A C R S")
provides
accelerated
recovery of
capita]
costs
of
m a c h i n e r y and e q u i p m e n t and c e r t a i n i n d u s t r i a l and c o m m e r c i a l
b u ild in g s
over
a period o f 3,
r o r 10 y e a r s .
A d d ition ally,
the program p rovid es sh orten ed ,
eu^it p roof recovery p e rio d s
for
other
d ep reciable
real
property.
ACRS s t a n d a r d i z e s t a x
accoun ting
r u l e s by d e f i n i n g
easily
id en tifiab le
cla sse s of
a sse ts
and
p rescrib in g
standard
recovery
period s
and
a c c o u n t in g methods fo r th e se c l a s s e s .
It
a ls o d iv o r c e s the
cap ital
r e c o v e r y p e r i o d from t h e c o n c e p t o f u s e f u l l i f e ,
a nd
e lim in a te s
costly
and
tim e
consum ing
d isp u tes
betw een
t a x p a y e r s and t h e I n t e r n a l R evenue S e r v i c e o v e r t h o s e u s e f u l
liv e s.
ACRS i s a p p l i c a b l e f o r c a p i t a l
i n v e s t m e n t ma de a f t e r
D e c e m b e r ?1 , 1 9 8 0 .

I.

10-5-3

for

3.

Equipment

and

C ertain

Real

Property

Coverage

G en erally,
the
10,
5
and
3 year
cla sses
includ e
a ll
ta n g ib le
personal
property
used
in
a trade
or
bu siness
or
h eld
for
the
p rod u ction
of
incom e,
and
ow n er-occu p ied
in d u stria l
structures
a nd d i s t r i b u t i o n
fa c ilitie s.
P u b lic
u t i l i t y p r o p e r t y i s a l s o c o v e r e d , but o n ly i f a n o r m a l i z a t i o n
method o f
accounting
is used.
No d i s t i n c t i o n
i s made un de r
the
proposal
betw een
new
and
used
property.
Bowever,
separate
recovery
periods
and
m ethods
are
prescribed
for
foreign a sse ts.
The s y s t e m d o e s n o t i n c l u d e p r o p e r t y t h a t i s
p r o p e r l y a m o r t i z e d ( i n l i e u o f d e p r e c i a t i o n ) or p r o p e r t y t h a t
i s d e p r e c i a t e d under a method not e x p r e s s e d in te r m s o f y e a r s
(such a s
th e un it o f p rod u ction m eth o d ), except th a t a s s e ts
d ep reciated
under
the
retirem en t-rep la cem en t-b etterm en t
m e t h o d a r e i n c l u d e d i n ACRS.
The
system
is
m andatory
w ith
respect
to
the
included
a s s e ts .
A cco rd in g ly ,
ADR
and
fa cts
and
circu m stan ces
d e p r e c i a t i o n w i l l no l o n g e r a p p l y .




31

2.

C la s s e s .

ACRS e s t a b l i s h e s t h r e e
real
property,
each
having
f o l 1ow s:
10-year

c l a s s e s f o r e q u i p m e n t and c e r t a i n
a d ifferen t
recovery p eriod ,
as

property
—
In du strial
structures,
retail
and
w h olesale d is t r ib u t io n f a c i l i t i e s ,
(in clu d in g
th eir
structural
com ponents)
used
by
th eir
owners,
a nd p u b l i c
u tility
p r o p e r t y w i t h an
ADP G u i d e l i n e P e r i o d a s o f J a n u a r y 1 , 1 9 8 3 o f
g r e a t e r th an 18 y e a r s .

5 -y ea r

property — T angible personal property
3 -y e a r or 1 0 -y e a r p r o p e r t y .

other

3-y ea r

property —
A utom obiles,
ligh t
duty tr u c k s ,
m a c h i n e r y and e q u i p m e n t u s e d f o r r e s e a r c h
developm ent.

than

and
and

C a p i t a l i n v e s t m e n t made d u r i n g t h e t a x a b l e y e a r i s c l a s s i f i e d
among t h e s e t h r e e c a t e g o r i e s a nd t h e a g g r e g a t e i n v e s t m e n t i n
each
cla ss
is
recovered
over
the
prescribed
period.
As
described
below ,
these
recovery p erio d s are e f f e c t i v e
after
ACRS i s f u l l y p h a s e d - i n .

3.

Recovery

allow ance

The
recovery
allow ance
is
computed
under
a ccelerated
method
p rin cip les.
When
fu lly
p h ased -in ,
(as
described
b e l o w ) , th e r e c o v e r y p e r c e n ta g e s in the fo llo w in g t a b l e w i l l
a p p ly .
These p e r c e n ta g e s approxim ate th e a p p l i c a t i o n o f th e
d o u b l e d e c l i n i n g b a l a n c e m e t h o d (DDP) f o r t h e f i r s t y e a r , a nd
the
su m -o f-y e a rs-d ig its
method
(SYD)
over
the
rem ainder
of
the
recovery period.
To d e t e r m i n e
the
recovery allow an ce,
th e s e p e rc en ta g e s are a p p lied a g a in st the o r i g i n a l unadjusted
b a s i s o f the p r o p e r ty .
P ull recovery i s g e n e r a lly concluded
in
ten ,
five,
and t h r e e
taxable
years,
resp ectively.
The
amount
of
recovery
allow an ce
is
not
reduced
to
reflect
salvage va lu e .




32

Tabl e
Ow nership
Year
1
2
3
4
5
6
7
8
9
10

C lass
10-year
10%
18%
16%
14%
12%
10%
8%
6%
4%
2%
100%

4.

H a lf-y ea r

o f Investm ent
5-year
3-year
20%
33%
32%
45%
24%
22%
16%
8%

100%

100%

convention

Present
law p r o v i d e s v a r i o u s
averaging
conventions
for
p u r p o s e s o f com puting d e p r e c i a t i o n
for
the year
i n w h i c h an
asset
is
acquired.
These c o n v e n tio n s a llo w a f u l l
year,
a
h a lf-y ea r,
or
no d e p r e c i a t i o n
depending
on
the
convention
c h o s e n a nd t h e t i m i n g o f
the a c q u i s i t i o n .
ACRS a d o p t s t h e
h a lf-y e a r convention.
Thus, the reco v e ry p ercen tage fo r the
f i r s t year provides for a h a l f - y e a r 's d e p rec ia tio n reg a rd less
o f when d u r i n g t h e y e a r t h e a s s e t
is acquired.
No r e c o v e r y
a llo w a n c e i s p rovid ed in the year o f d i s p o s i t i o n .

5•

G ain

or

loss

on

d isp o sitio n s

or

other

retirem ents

Upon d i s p o s i t i o n
or o t h e r
r e t i r e m e n t o f an a s s e t , g a i n
or
loss
is
recogn ized .
Cain
reflectin g
prior
recovery
a l l o w a n c e s i s ta x e d a s o r d i n a r y income
( s e c t i o n 1245 r u l e s ) .
U nlike
prior
law
(section
1250),
there
is
no p r e f e r e n t i a l
r e c a p t u r e r u le fo r b u i l d i n g s in the 1 0 -y e a r c l a s s .
Sp ecial
ru les
are
provided
for
taxpayers
who d e a l
in
m a s s a s s e t s a n d who ma y f i n d
i t burdensome to keep tr a c k o f
sp ecific
assets.
T h e s e t a x p a y e r s ma y m a k e no a d j u s t m e n t t o
th eir
records
to r e f l e c t d i s p o s i t i o n s
a nd may i n s t e a d
treat
a l l r e a l i z e d p roc e ed s as o r d in a r y incom e.




33

6.

Increase

in

Carryover

Period

A m a n d a t o r y s y s t e m o f a c c e l e r a t e d a l l o w a n c e s ma y r e s u l t
in
increased
net
operating
lo sses
( NOLs)
or
low er
cred its
used fo r c e r t a i n ta x p a y e r s —
e s p e c i a l l y new b u s i n e s s e s w i t h
start
up l o s s e s .
For t h e s e
t a x p a y e r s t h e NOLs a nd c r e d i t s
may e x p i r e u n u s e d a f t e r t h e p r e s e n t 7 - y e a r c a r r y o v e r p e r i o d .
For
th is
reason,
the
proposal
in creases
the
NOL
and
i n v e s t m e n t c r e d i t c a r r y o v e r p e r i o d s from s e v e n t o t e n y e a r s .

7.

P la ced -in -serv ice

ru les

m odified

Under
the
p ro p o sa l,
investm ent
in
property
w ith
a
c o n s t r u c t i o n p e r i o d o f two y e a r s o r more q u a l i f i e s
fo r both
the 'in v e s tm e n t
tax
cred it
a nd
recovery
allow ance
at
the
earlier
of
the
date
the
taxpayer
makes
payments
for
the
construction
of
the
property
or
the
date
the
property
is
p l a c e d in s e r v i c e .
Thus, for p r o p e r ty w ith long c o n s t r u c t io n
t i m e s , t h e i n v e s t m e n t t a x c r e d i t and c o m m e n c e m e n t o f r e c o v e r y
a llo w a n c e are g e n e r a l l y a v a i l a b l e im m ed ia tely w ith r e s p e c t to
the
funds
expended
in
the
current
year
to
construct
the
p rop erty rather
than b e in g d e la y e d t o th e y ea r in which th e
p r o p e r t y i s p l a c e d in s e r v i c e .
H o w e v e r , t h e amount on w h ic h
the
investm ent
tax
cred it
and
the
recovery
allow ance
are
c o m p u t e d may n o t e x c e e d t h e p o r t i o n
o f the o v e r a ll
cost
of
con stru ction
which
is
attrib u tab le
to
the
portion
of
the
con stru ction
com pleted
by
the
end
of
the
taxable
year.
T a x p a y ers w ith p u b l i c u t i l i t y p r o p e r ty are g iv e n a one tim e
e l e c t i o n to c o n t i n u e under th e p r i o r p l a c e d - i n - s e r v i c e r u l e s
o r t o u s e t h e more l i b e r a l r u l e s p r o v i d e d under t h e p r o p o s a l .

8.

Special
a .

PuJes

E arnings

and

p rofits

Under
present
law
(section
312(k)),
for
purposes
of
com puting
the
earnings
and
p rofits
of
a
corporation ,
the
allow an ce
for
d epreciation
is
the
amount
allow ab le
if
the
stra ig h t-lin e
method
were
used.
For
th is
purpose,
the
a p p lica b le
life
includ es
t h e 20 p e r c e n t v a r i a t i o n p e r m i t t e d
under
ADR.
T his
p rovision
was
enacted
to
prevent
the
d istrib u tio n
of
ta x -fre e
d ivid en d s
from
a cc e le ra te d
d ep reciation .




34

To
prevent
ACFS
from
being
used
by
corporations
to
g e n e ra te d iv id e n d s th at are tax
free
to th eir
shareh old ers,
the prop osal
provides
a sp ecial
set
of
recovery
allow an ces
f o r e a r n i n g s a nd p r o f i t s p u r p o s e s .
These recovery allow ances
a r e d e te r m in e d by m o d if y in g
t h e r e c o v e r y p e r i o d and m e t h o d .
The m o d i f i e d r e c o v e r y p e r i o d s a r e 30 y e a r s f o r r e a l p r o p e r t y ,
20 y e a r s f o r 1 0 - y e a r p e r s o n a l
property,
10 y e a r s f o r
5-year
property,
and 5 y e a r s f o r 3 - y e a r p r o p e r t y .
As un der p r e s e n t
law ,
the
straigh t
lin e
r e c o v e r y method
is
used
over
these
periods.
T h u s , t h e e a r n i n g s and p r o f i t s a l l o w a n c e s a r e :
for
r e a l p r o p e r t y , 3.33% per y e a r ; fo r 1 0 - y e a r p e r so n a l p r o p e r t y ,
5 percent;
for
5-year
property,
10 p e r c e n t ;
a nd f o r
3-y ea r
p r o p e r t y , 20 p e r c e n t .
b.

Foreign

assets

a nd

minimum

tax

P r e s e n t law p r o v i d e s t h a t a s s e t s u se d o u t s i d e t h e U n it e d
S t a t e s may b e a s s i g n e d g u i d e l i n e
liv es
u n d e r ADP.
However,
the
20
percent
variation
is
not
a p p lica b le.
A ccelerated
dep reciation
is g e n e ra lly perm itted
for
foreign
a s s e t s over
the a p p lic a b le l i v e s .
T h e minimum t a x p r o v i s i o n s
of
present
law
(section
57
(a)
(3))
provide th a t,
fo r n o n -c o r p o r a t e l e s s o r s , the e x c e s s
of
a ccelera ted
over
straigh t
lin e
depreciation
on
leased
person al property
is a tax p r e fe r e n c e
item .
As in t h e c a s e
of
assets
used
outside
the
U nited
States,
the
20
percent
variation
allow ed g e n e r a lly
u n d e r ADP
i s not a p p l i c a b l e in
c o m p u t i n g s t r a i g h t l i n e r e c o v e r y f o r minimum t a x p u r p o s e s .
C o n sisten t
w ith
the
sp ecia l
d ep recia tio n
ru les
of
present
law ,
the m o d ifie d
recovery periods o f
30 y e a r s
for
real
property,
20
years
for
10-year
personal
property,
10
years
for
5-year
property,
and 5 y e a r s
for
3-y ea r
property
w ill
also
apply to re co v e ry o f
investm ent
in f o r e i g n a s s e t s
a n d f o r m i ni m u m t a x p u r p o s e s . ' A l s o , t h e s t r a i g h t l i n e m e t h o d
w i l l be u s e d .

9.

Investm ent
a.

tax

cred it

G en erally

ACRS
character




retain s
the
ru les
of
present
law
governing
the
o f property e l i g i b l e
for the investm ent tax c r e d it

35

(IT C ).
I t d o e s , h o w e v e r , c h a n g e t h e r u l e s w h i c h m a ke u s e f u l
life
d eterm in ative o f e l i g i b i l i t y
for,
a nd w h i c h p e r t a i n t o
recapture o f , that c r e d it .
Under ACPS,
a fu ll
regular
ten percen t
investm ent
tax
cred it
is
allow ed
for
a ll
e lig ib le
10-y ea r
and
5 -y e a r
p e r s o n a l p r o p e r t y a nd a s i x p e r c e n t c r e d i t i s a l l o w e d f o r a l l
e l i g i b l e 3-year p rop erty .
Conform ing r u l e s are p r o v id e d w ith
r e s p e c t t o t h e FSOP a n d e n e r g y c r e d i t s .
E lig ib le property is
the
same
as under p r e s e n t
law .
Thus,
the c r e d i t does not
a pp ly
to
10-year
real
property
other
than
su b stan tially
reh ab ilitated
s t r u c t u r e s w ith r e s p e c t to which th e c r e d i t i s
a llo w e d under p r e s e n t la w .
A c c o r d i n g l y , u n d e r ACRS t h e a m o u n t o f c r e d i t no l o n g e r
depends
upon
the
estim ated
useful
life
of
the
property.
However,
if
the p ro p e rty i s not held
for at le a s t
one f u l l
year
after
it
is
placed
in
service,
the
en tire
cred it
is
recaptured.
F o r 1 0 - y e a r and 5 - y e a r p r o p e r t y , 8 0 , 6 0 , 4 0 , o r
20 p e r c e n t o f th e c r e d i t
is recaptured
if
the a s s e t
i s not
held
for
at
least
tw o,
three,
four,
or
five
fu ll
years,
resp ectively.
For 3 - y e a r p r o p e r t y , t h e r e c a p t u r e p e r c e n t a g e s
a r e 6 7 and 33 p e r c e n t f o r a f a i l u r e t o h o l d f o r two o r t h r e e
fu ll years, resp ectively.
b.

A pp lication

o*

at

risk

ru les

Under
present
law
(section
465) ,
a
taxpayer
may n o t
d e d u c t l o s s e s f r o m an a c t i v i t y i n e x c e s s o f a m o u n t s a t r i s k .
To
lim it
the
use
of
ACPS
in
h igh ly
leveraged
tax
sh elter
a ctiv ities,
the
proposal
extends
the
at
risk
ru les
to
the
i n v e s t m e n t c r e d i t a l l o w e d u n d e r A CR S .

10.

Repeal

of

section

179

ACPS
provides
su b stan tial
ben efits
to
sm all
bu siness
stem m ing
from
the
more
lib era l
recovery
allow an ces
and
i n v e s t m e n t c r e d i t p r o v i d e d and f r o m t h e s i m p l i f i c a t i o n o f t h e
system
g en era lly .
A ccord in gly,
section
179
of
the
Code,
providing
for
add itional
first
year
dep reciation ,
w ill
not
con tinue to o ffe r
s i g n i f i c a n t advantages a f t e r the enactm ent
o f the p r o p o sa l.
Thus, the prop osal p ro v id e s fo r
repeal o f
sectio n 179.




36

11.

E f f e c t i v e d a te and t r a n s i t i o n

r u le s

ACPS a p p l i e s g e n e r a l l y t o p r o p e r t y p l a c e d i n s e r v i c e b y
the
taxpayer
after
December
31 ,
1980.
A special
ru le
is
provided
to
prevent
prop erty placed
in s e r v i c e b e fo r e th a t
date
from b e in g b ro u g h t w i t h i n
the
system by post-D ecem ber
3 1 , 1980 t r a n s a c t i o n s between r e l a t e d t a x p a y e r s .
A f i v e year p h a s e -i n a p p l i e s to the re c o v e ry a llo w a n c e s
for
10-year
a nd 5 - y e a r p r o p e r t y .
A ll
p rov isio n s pertain ing
to
3-year
property w ill
begin
w ith
the
effective
date,
as
w i l l t h e t e n p e r c e n t i n v e s t m e n t c r e d i t f o r t h e 1 0 - and 5 - y e a r
c la sse s.
The p h a s e in o f t h e 5 - y e a r c l a s s i s b a s e d on t h e p r e s e n t
ADP g u i d e l i n e
cla sses
a nd l i v e s .
For
1981,
m a c h i n e r y and
equipm ent w i l l
be a s s i g n e d
to
five
su b classes
according
to
the fo llo w in g ta b le :
S h o r t e s t ADP l i f e
9 or more y e a r s
8 or 8 . 5 y e a r s
7 or 7 .5 years
6 or 6 . 5 y e a r s
5 . 5 or few er y e a r s

Recovery
9
8
7
6
5

period

The
a ccelera ted
recovery
sch ed u le
a p p lie s
to
each
recovery
p eriod
as
under
the
proposal
g en e ra lly .
The
re co v e ry schedule
is
b a s e d on s i m i l a r m e t h o d s u s e d
for
the
fu lly
p h a sed -in
sch edu le,
i . e . ,
double
declin in g
balance,
w i t h a h a l f - y e a r c o n v e n t i o n , f o r t h e f i r s t y e a r , a nd s u m - o f th e-years
d igits
for
the
rem ainder
o f the re covery p e r io d .
For
assets
placed
in
service
between
1981
a nd
1985
the
recovery period
fo r each s u b c la s s
is
red u ced , but not below
five years,
in one y e a r
increm ents.
T h u s , an a s s e t
o f the
type
now w r i t t e n
off
over
eigh t
years
that
is
acquired
in
1 9 8 4 w i l l be w r i t t e n o f f o v e r f i v e y e a r s a t r a t e s r e f l e c t i n g
t h e DDB/SYD m e t h o d .
For a s s e t s
in t h e
10-year
cla ss
acquired
in 1 9 8 1 ,
the
recovery period
is
18 y e a r s .
For a s s e t s
acquired
in each
s u c c e e d in g y e a r , the p e r io d i s reduced a n n u a lly in in crem en ts
of
two y e a r s
u n til
the
ten
year
period
is
estab lish ed
for
a cq u isition s
i n 1 9 8 5 and t h e r e a f t e r .
A gain,
an a c c e l e r a t e d
rate
schedule
b a s e d on t h e DDB/SYD « e t h o d
ap p lies
to
these
p h a se-in recovery p erio d s.




37

The
schedule
of
p h ase-in
rates
for
the
10-year
and
5 -y ea r
cla sse s
is
set
forth
in
the
appendix.
However,
a
sp ecial
ru le
is
provided
to
m a ke
the
tran sition
period
sim pler
for
sm all
bu sinesses.
Thus,
under
the
p rop osal,
during
the
tran sition
period
$ 10 0,00 0
of
add itions
to
the
cap ital
account
for
5-year property w ill
be s u b j e c t
to
the
fu ll
f i v e year recovery ra te im m ediately.
As a r e s u l t ,
for
such in v e s tm e n t th e b o o k k ee p in g g e n e r a l l y r e q u i r e d under th e
s l i d i n g s c a l e t r a n s i t i o n r u l e s w i l l n o t be n e c e s s a r y .

I I .

A udit

Proof

L ives

for

Peal

Estate

T h e ACPS p r o p o s a l
also
sim p lifies
and a c c e l e r a t e s
the
recovery
allow an ces
for
real
estate
not
included
in
the
10-year
cla ss.
These
ru les
elim in a te
the
costly
a nd
tim e
c o n s u m i n g d i s p u t e s t h a t p r e s e n t l y a r i s e b e t w e e n t a x p a y e r s and
the
Internal
Revenue
S ervice
over
the
usefu l
liv es
of
b u ild in g s,
and
sim p lify
real
estate
cost
recovery
and
c o l l a t e r a l a r e a s such as component d e p r e c i a t i o n .
A t t h e same
t i m e , t h e t a x b u r d e n on r e a l e s t a t e i n v e s t m e n t i s r e d u c e d .
Thus th e p r o p o s a l e s t a b l i s h e s m andatory r e c o v e r y p e r i o d s
for real
estate
a nd a l l
s t r u c t u r a l com ponents which a re not
s u b j e c t to c h a l l e n g e by th e I n t e r n a l Revenue S e r v i c e .
Cost
r e c o v e r y o f th e in v e stm e n t w i l l be o v er th e s p e c i f i e d p e r io d
on a s t r a i g h t l i n e b a s i s .
C o n s is te n t w ith t h i s s t r a i g h t l i n e
recovery
approach,
ordinary
income
recapture
on
sales
and
minimum
tax
exposure
have
been
elim in ated .
The
recovery
p e r io d s provided fo r the d i f f e r e n t c l a s s e s o f re a l e s t a t e are
as fo llo w s :
o

I n d u s t r i a l and c o m m e r c i a l b u i l d i n g s n o t i n c l u d e d
in the 1 0 -y e a r 1 0 - 5 - 3 c l a s s
(i.e .
leased
in d u strial
stru ctu res,
r e ta il,
and
w h olesale
d istrib u tio n
f a c i l i t i e s , and a l l o f f i c e b u i l d i n g s ) —
15 y e a r s .

o

Low

o

Other

incom e

housing

resid en tial

—
real

15

years.

estate

—

18

years.

These p r o v is io n s
a pp ly g e n e r a l l y
fo r p rop erty acquired
o r p l a c e d in s e r v i c e a f t e r December 3 1 , 1 9 8 0 .
The p r o v i s i o n s
p ertain ing
to
the
18-year
cla ss
are
effective
im m ediately,
w h i le a t h r e e year ph ase in a p p l i e s to th e 1 5 - y e a r c l a s s e s .




38

For
these
latter
cla sses,
assets
acquired
in
1981
w ritten
o ff
over
18 y e a r s ,
those
acquired
in
1982
y e a r s , and t h o s e a c q u i r e d i n 1 9 8 3 o v e r 15 y e a r s .
For
foreign
real
property
and
for
determ inin g
e a r n i n g s a nd p r o f i t s ,
the reco v e ry
y e a r s , and t h e m ethod i s s t r a i g h t l i n e .




39

w ill
over

be
16

purposes
period
is

of
30

Appendix

Recovery P e rc en t ag e s During P h e s e - i n Period

Ownership
Year

Recovery Period
18

16

%

14

12

7%

9

7

i 3%

1 4%

20

22

25

14

.1 7

19

2^

11

13

15

16

16

]

0

13

12

1 2

12

10

9

8

6

4

%

1

6

2

11

12

14

3

10

I7

77

10

%

15

6

8

8

]

1

4

9

5

9

9

6

8

9

9

10

7

7

8

8

8

7

8

7

7

7

7

5

9

6

6

6

6

3

10

5

5

5

4

n

5

5

4

3

2

4

4

•
j

1

13

4

3

2

]4

3

2

1

35

2

2

16

2

%

1

i

17
*18




1

100%

100%

100%

100%

40

100%

100%

100%

THE WHITE HOUSE
Office of the Press Secretary

EMBARGOED FOR WIRE TRANSMISSION
UNTIL 4:00 P.M. (E.S.T.) AND
EMBARGOED FOR RELEASE UNTIL
9 P.M. (E.S.T.), W ednesday, February 1 8 ,1981

February 18,1981

FACT SHEET
President Reagan’s Initiatives to Reduce Regulatory Burdens

Summary: President Reagan today announced the details of a far-reaching program to reduce
the burden of Federal regulations and paperwork, and to reduce the intrusion of the Federal
Government into our daily lives.
BACKGROUND
. During the campaign, President Reagan promised swift action to ea se the economic
burden of government regulation.
. Previous administrations have instituted programs to manage the regulatory process. But,
despite these measures, regulations have continued to proliferate, often based on
inadequate analysis of the costs and benefits that would result
• During the last month of the Carter Administration, regulatory agencies in the Executive
Branch issued more than 150 final regulations. Of these so-called "Midnight Regulations,"
over 100 were scheduled to becom e effective within the next 60 days. Many of these new
regulations impose substantial new burdens on the economy.
• Often, the high cost of regulatory compliance is due to the cumulative effect on an
industry of many agencies’ rules, rather than to a single major rule. For example, at least
five Federal agencies directly regulate the auto industry, and these five agencies are now
considering more than 50 significant new auto rules.
« This year, the Federal government is forcing Americans to spend over a billion hours
providing information to the government.
ACTIONS TAKEN SINCE JANUARY 20
Since taking office on January 20th, the President has taken a number of actions as a part of
a broad effort to free the econom y, wherever feasible, of the hidden tax of complying with
Federal rules and paperwork requirements which do not contribute to the public welfare. This
effort will also seek to assure that regulations essential to the goal of protecting the public
health and safety achieve their goal in the most efficient manner.
1. Task Force on Regulatory Relief
President Reagan announced the creation of a Presidential Task Force on Regulatory
Relief on January 22, 1981. It is chaired by the Vice President. The other members are
the Secretary of the Treasury, the Attorney General, the Secretary of Commerce, the
Secretary of Labor, the Director of the Office of Management and Budget, the Assistant
to the President for Policy Development, and the Chairman of the Council of Economic
Advisers.




This Task Force has ongoing responsibilities which will be reinforced by the President's
Executive Order on Federal Regulation. The Task Force will:
•

Review major regulatory proposals by executive branch agencies, especially those
proposals that would appear to have major policy significance or where there is
overlapping jurisdiction among agencies.

•

A ssess executive branch regulations already on the books, especially those that are
burdensome to the national economy or to key industrial sectors.

•

Oversee the development of legislative proposals in response to Congressional
timetables (e.g., the Clean Air Act must be reauthorized this year), and codify the
President's views on the appropriate role and objectives of regulatory agencies.

•

Seek to increase public awareness of regulations and their
regulatory expenditures that do not show up in the Federal budget.

•

Make recommendations to the President on regulatory personnel and how to reform
regulation through Executive Orders, agency actions, and legislative changes.

impact,

including

2. Termination of CW PS’s W aoe-Price Program
On January 29, President Reagan issued Executive Order 1 2 2 8 8 terminating the Council
on W a g e and Price Stability’s wage-price standards program.
The Council on W age and Price Stability (CW PS) was created in 1974 to study and
encourage wage and price restraint, monitor inflation in the economy, encourage
productivity, and review the inflationary impact of government programs and regulations.
In 1978, President Carter directed CW PS to establish a program of "voluntary" wage and
price standards.
The Office of Federal Procurement Policy w as ordered to issue
regulations denying Federal contracts to violators of these standards. The C W P S staff
grew from approximately 5 0 to 2 3 8 in 1979. A s of January 2 0 , 1981, employment was
170.
The C W P S program of wage-price standards proved ineffective in halting the rising rate
of inflation. It proved to b e an unnecessary burden on labor and industry, and a waste of
taxpayers’ money.
About $ 1 .5 million will b e saved in 1981 by this action, employment in the Executive
Office of the President will be reduced by about 135 people, and Federal requirements
that businesses submit voluminous reports will b e ended. Com panies spent som e $ 3 0 0
million to comply with the reporting requirements alone of this program (more than 5 ,0 0 0
company reports were submitted to CWPS).
C W P S ’s small regulatory staff will work
closely with OMB and the Presidential Task Force on Regulatory Relief to carry out the
program of regulatory relief.
3.

Postponement of Pending Regulations
On January 29, President Reagan requested the heads of 12 departments and agencies,
to the extent permitted by law, to postpone the effective d a te s of regulations that
otherwise would have b ecom e effective before March 29 and refrain from issuing any
new final regulations during this sam e 60-day period. This suspension in the effective
date of new regulations w as to:
•

Allow the new Administration time to review the "midnight” regulations issued during
the last days of the Carter Administration to assure that they are cost-effective and in
concert with this Administration’s policies.

.

Allow time for this Administration’s appointees to com e aboard and to b ecom e familiar
with the details of the various programs for which they will b e responsible.




2

•

Allow time for this Administration, through the Presidential Task Force, to develop
improved procedures for management and oversight of the regulatory process.

The request was sent to the heads of the Departments of Agriculture, Commerce,
Education, Energy, Health and Human Services, Housing and Urban Development,
Interior, Justice, Labor, Transportation and Treasury, and the Environmental Protection
Agency.
With certain exceptions, the effective dates of all rules that would have b ecom e legally
effective during the 60-d ay period have been extended. The Office of Management and
Budget has received and has granted several requests for waivers of this regulatory
suspension. Most such ca ses involve regulatory actions necessary for econom ic activity
to go forward.
4.

Initial Regulatory Actions
The program of regulatory relief is underway. Several cabinet departments and agencies,
on their own initiative and in coordination with the President’s Task Force, have taken
action on several significant issues:
.

On February 2, the Secretary of Education withdrew the proposed bilingual education
rules. These rules would have required all school systems to offer bilingual instruction
to each child w hose primary language is other than English.
The Department
estimated that the proposed rule could have cost up to $1 billion over the first 5 years
of the program and an annual maintenance cost of between $72 million and $157
million thereafter.

•

On February 9, the Secretary of Transportation proposed a one-year delay in a
regulation which would have mandated the installation of passive restraints, beginning
with large cars, in Septem ber 1981. The implementation of this regulation could have
resulted in consum ers paying as much as $ 8 0 0 more per vehicle equipped with air
bags. Moreover, this requirement would have hit U.S. auto producers hardest. Before
the government im poses additional costs on the consum er and puts an additional
financial burden on an already troubled industry, it must b e sure that such an action is
warranted. A one-year delay will provide the opportunity for such an evaluation.

•

On February 9, the EPA asked the D.C. Court of Appeals to remand to it a rule setting
noise emission standards for garbage trucks. This request s e t in motion a process in
which EPA will review regulatory alternatives suggested by the garbage truck industry.
During this review, EPA will not enforce any aspect of the rule. When the rule was
issued, EPA estimated that it would cost $ 2 5 million annually to comply with the rule,
most of which would be borne by municipalities.

•

On February 12, the Secretary of Labor announced action on three major rules.
-

An. OSHA rule requiring that chemicals in the workplace b e labeled w as withdrawn
for reconsideration. This rule, if issued in final form, would have cost between $ 6 4 3
million and $ 9 0 0 million initially, and between $338 million and $473 million annually
according to Labor Department figures.
Lower-cost m eans of assuring worker
protection will be sought.

-

New rules under the Fair Labor Standards Act were postponed indefinitely. These
would have raised the salary levels used a s tests, in part, to determine whether
executives must b e paid overtime. This would have co st employers over $ 5 0 million
annually, would have reduced employment opportunities, and would have raised
prices, especially in the fast foods industry.

-

The implementation of new rules under the Service Contract Act w as postponed.
T hese rules would have extended Davis-Bacon "prevailing w age" principles to
those timber sa les, automatic data processing, and research and development firms




3

under contract with the Federal government. The Department estimated that these
rules would have cost at least $68 million annually.
.

On February 14, OMB withdrew the policy memorandum on Federal Support for
Hospital Construction issued by the previous Administration. This policy set out an
elaborate review process to prevent Federal support for unnecessary hospital
construction and renovation projects. In the Administration’s judgment, the objectives
of the policy could be met more simply and effectively through other means.

•

On February 17, the
temperatures which
allows operators of
energy that best suit

.

On February 17, the Secretary of Energy took several actions:

President rescinded the mandatory Federal controls on building
had been imposed by the previous Administration. This action
non-residential buildings to choose the methods of conserving
their circumstances.

-

Announced that national energy efficiency standards for major household
appliances will not be issued until a thorough review is completed.
The 1980
proposal would require producers to redesign, by 1986, virtually all existing models
of these appliances and to retool their production lines. As a result, many small
firms would probably be forced out of business. Consumers would face sharply
higher purchase prices — about $ 5 0 0 million annually. Low-income families could
be especially hard-hit, since the standards would prohibit continued production of
the kinds of lower cost appliances they can afford.

-

Withdrew proposed standby energy conservation m easures involving a compressed
work week, vehicle use stickers, and the part of the em ployer-based commuter and
travel measures concerning working hours and transit subsidies. In addition, the
Secretary has proposed to withdraw several interim final measures, including
odd-even day motor fuel purchases, additional em ployer-based commuter and
travel m easures, increased enforcement a n d /o r reduction of the 5 5 m.p.h speed
limit and mandatory temperature restrictions.
This action will remove measures
which, if implemented, would interfere excessively in the daily life and business of
Americans.

.

On February 17, the Director of OMB revoked the Department of Energy’s clearance
under the Federal Reports Act for the collection of industrial energy consumption
data.. A number of respondents have provided data which demonstrated that the
information requested is needlessly detailed and unduly burdensome. This action will
terminate the collection of industrial energy data for sites not subject to Federal
regulation and preclude the Federal Government from expanding its regulatory
programs.

.

On February 17, President Reagan revoked Executive Order 12264, which established
a cumbersome, duplicative and burdensome regulatory policy regarding the export of
some hazardous substances. The rescinded Executive Order would have threatened
American workers' jobs and could have disrupted production abroad where affected
U.S. exports serve as vital material inputs.
Procedures already exist which inform
foreign governments of hazards associated with exported American products. Thus,
each foreign government can decide for itself whether to import the products and
what precautions to take.

NEW ACTIONS ANNOUNCED BY THE PRESIDENT
Building on the steps taken since January 20th, today the President announced the following
additional actions taken by his Administration:
1.

T he Executive Order on Federal Regulation




4

Yesterday, the President signed a new Executive Order designed to improve coordination
and management of the Federal regulatory process.
This Order will produce better
quality regulation and reduce the ex cess burden of regulation on the American people.
The Order:
•

•

Charges the Office of Management and Budget with administering^ the new order,
subject to the overall direction of the Presidential Task Force on Regulatory Relief.

«

Emphasizes that: regulatory decisions should be based on adequate information;
actions should not be undertaken unless the potential benefits to society outweigh the
potential c o sts; and regulatory priorities should b e set on the basis of net benefits to
society.

>

Directs agen cies to determine the most cost-effective approach for meeting any given
regulatory objective, and requires that factors such as the econom ic condition of
industry, the national economy, and prospective regulations be taken into account.

.

2.

Instructs the agencies on what is expected of them with respect to their regulatory
work and provides reassurance to the American people of the government's ability to
control its regulatory activities.

Requires each agency to perform certain tasks a s part of the development of an
important regulation. A Regulatory Impact Analysis is required to evaluate potential
benefits and costs in light of the regulatory objectives. A determination must be made
that any proposed rule is consistent with applicable legal authority and Presidential
policy and that it reflects careful evaluation of the comments of all persons affected by
or interested in the regulation. The Task Force is to oversee this process; the Office
of Management and Budget is to make substantive comments on regulatory analyses,
help determine which new and existing regulations should be so analyzed, and
oversee the publication of semiannual regulatory agendas.

Integrating the Goals of Regulatory Relief with Paperwork Reduction
The Administration’s program to reduce regulatory burdens will be integrated with its
program to implement the Paperwork Reduction Act of 1980. During 1981, given present
requirements, Americans will spend over 1.2 billion hours filling out government forms.
This is equivalent to the annual labor input for the entire steel industry.
The costs of Federal paperwork and regulation discourage Americans from opening small
businesses, doctors from accepting Medicare patients, and State and local governments
from requesting needed Federal aid.
The Office of Management and Budget has
exercised so m e control over the paperwork burdens of the cabinet departments since
1942. Last year, OMB supervised an effort which resulted in a reduction of almost 10
percent in the burden imposed by agencies subject to OMB Federal Reports Act
authority. However, agencies not subject to OMB information collection review increased
their paperwork load last year by more than 10 million hours.
The Paperwork Reduction Act of 198 0 brings the independent regulatory agencies under
OMB authority, directs that the paperwork burden b e reduced by 15 percent by October
1, 1982, and relates the effort to reduce paperwork burden to the need to minimize
regulatory burden.
This Act creates an Office of Information and Regulatory Affairs within OMB and directs
the agency to review Federal regulations that contain a recordkeeping or reporting
requirement under a variety of different procedures.
It provides that no agency may
impose civil or criminal penalties on any person who fails to comply with a recordkeeping
or reporting requirement that has not received OMB approval.

3. Future Candidates for Regulatory Review




5

The Administration is completing a comprehensive initial review of the regulations of 14
key executive branch agencies: Departments of Treasury, Justice, Interior, Agriculture,
Commerce, Labor, Health and Human Services, Housing and Urban Development,
Transportation, Energy and Education, and the Environmental Protection Agency, the
Equal Employment Opportunity Commission and the Office of Management and Budget.
This review covers both rules under development as well as rules now in effect.
Regulations now under development can usually be withdrawn, modified, or cancelled by
the agency head at his or her direction. In the c a s e of existing rules, the agency head
will have to issue a new notice of proposed rulemaking and follow usual procedures
before making substantive change. That is, revision or withdrawal of these existing rules
would require that the agency propose the revision or withdrawal and obtain public
comment before taking final action.
During the com ing weeks and months, agencies will be conducting intensive reviews of
many existing and proposed regulations -• at their own initiative, and in response to
requests from the Task Force on Regulatory Relief.
4. Legislative Changes
The Administration will examine all legislation that serves as the foundation for major
regulatory programs.
This review will be led by the Presidential Task Force on
Regulatory Relief and will result in recommendations to reform these statutes.
Not all of our regulatory problems can be solved satisfactorily through more effective
regulatory management and decision-making.
Statutory constraints often preclude
effective regulatory decisions.
Also, the Administration's efforts to better control the
regulatory p rocess may, in so m e cases, require further Congressional action.
For
example:
•

Many of the statutes are conflicting, overlapping, or inconsistent.
Som e force
agencies to promulgate regulations while giving them little discretion to take into
account changing conditions or new information.
Other statutes give agencies
extremely broad discretion, which they may som etim es exercise unwisely. Statutes
should not force agencies to promulgate inefficient regulations: they should provide
agencies with requisite discretion and sufficient direction so that they act wisely.

•

Compliance deadlines are often established in various laws.
In general, they are
imposed to ensure that agen cies move forward expeditiously in implementing the law.
However, th ese deadlines are often impossible to meet, especially if the rules
developed are to be based on adequate information.
Deadlines in statutes also
constrain agencies' ability to tailor rules to the economic conditions of the affected
parties. W here deadlines are unreasonable, c h a n g e s will be sought.

Over the past few years numerous procedural reforms have been introduced in Congress
that would respond to increasingly burdensome and intrusive regulations being imposed
by the Federal Government. They have included requirements for regulatory analyses, an
across-the-board legislative veto, and broader judicial review of the substance of
regulations. While supportive of the goals of such proposals, the Administration is
concerned about legislation that may result in excessive layering of review or an undue
broadening of control responsibility. Legislative proposals should be developed in a
manner to ensure they do not make the process even more complex, increase the size of
the federal bureaucracy, make it more difficult to make needed changes in regulations,
create additional delay and uncertainty, or contribute to the waste that results from the
current adversarial nature of the rulemaking process.




6

T h e E c o n o m ic P la n

C o n te n ts

I.

S um m ary F a ct Sheet
A P ro g ra m f o r E c o n o m ic R e c o v e r y

II.

Fact Sheet
P r e s i d e n t R e a g a n ’s I n i t i a t i v e s t o R e d u c e R e g u l a t o r y B u r d e n s

III.

A d d r e s s b y th e P r e s id e n t to a J o in t S e s s io n o f C o n g r e s s

IV .

R e m a r k s o f t h e P r e s id e n t at B r e a k fa s t w ith E d ito r s










I.

S u m m ary Fact Sheet
A P ro g r a m f o r E c o n o m ic R e c o v e r y




THE WHITE HOUSE
Office of the Press Secretary

EMBARGOED FOR WIRE TRANSMISSION
UNTIL 4 P.M. (E.S.T.)
AND RELEASE UNTIL 9 P.M. (E.S.T.)
Wednesday, February 18,1981.

February 18,1981

SUMMARY FACT SHEET
A Program for Economic Recovery
CONTENTS
Summary........................................................................................................................................... ......1
Background...................................................................................................................................... ......1
New Actions Announced T oday................................................................................................... ......2
Budget Outlook with the President's Budget Savings and Tax Reduction
Program .................................................................................................................................... ......2
The President’s Budget Reform Plan........................................................................................... ......3
A. Past Actions Have Contributed to Today’s Economic and Budget Problems.................3
B. New Priorities............................................................................................................................3
C. Criteria Used in Evaluating Programs and Funding Levels................................................3
D. Major Features of the President’s Budget Reform Program..............................................4
E. A Stronger National Defense within
Restrained Overall Spending Levels................................................................................ ..... 4
F. The Resulting Shift in Spending...................................................................................... ..... 5
G. 1st. Step in Budget Reform ............................................................................................. ..... 6
H. The Fully Revised 1982 Budget....................................................................................... ..... 6
The President’s Proposal to Reduce Taxes................................................................................. .....6
A. Reducing Individual income taxes by 30% .................................................................... .....6
B. Encouraging Productive Investments by Business & Industry.................................... .....6
C. Estimated Receipts with the Tax Reduction Program.................................................. .....8
The President’s Program to Reduce Regulatory Burden.......................................................... .....8
A. Actions Taken Since January 20th.................................................................................. .....8
B. New Actions Announced by the President..................................................................... .....9
Table: Major Program Reductions & Increased User Charges.....................................................10




THE WHITE HOUSE
Office of the Press Secretary

EMBARGOED FOR WIRE TRANSMISSION
UNTIL 4 P.M. (E.S.T.)
AND RELEASE UNTIL 9 P.M. (E.S.T.)
Wednesday, February 18,1981.

February 18,1981

SUMMARY FACT SHEET
The President’s Economic Program
Summary: President Reagan tonight presented to a Joint Session of the Congress a
comprehensive program to bring about a recovery of the Nation’s economy to reduce the
burdens of high inflation, high taxation and over-regulation. The program calls for fundamental
redirection in the role of the federal government, including:
. Reductions in personal tax rates and business taxes;
. Spending cuts and other measures to reduce the budget deficit;
. Reductions in the burden and the intrusion of Federal regulations; and
. A new commitment to a stable monetary policy.
BACKGROUND:
. Immediately upon taking office, President Reagan asked for a comprehensive audit of our
Nation’s economic situation. He described the findings in a Nationwide television address
on February 5, 1981. Among the serious economic problems that he found upon taking
office were:
- Rates of consumer price inflation were 13.3% in 1979 and 12.4% in 1980, up from 4.8%
in 1976.
- Interest rates for short term credit had reached 20%, and home mortgage rates were
over 15%, two and one-half times 1960 levels.
- Almost eight million people were unemployed.
- Under the previous Administration the Federal budget was out of control:
. Estimates made in March 1980 of Federal spending in fiscal year 1981 were low by
at least $50 billion, and estimates of the deficit were low by over $70 billion.
. Recent Federal spending has been growing by about 16% per year.
. Deficits this year are now expected to be around $80 billion, including over $55
billion that shows up in the Federal budget and about $25 billion which is hidden in
so-called "off-budget" programs.
. The national debt is approaching $1 trillion.
- The percentage of income paid by individuals in Federal taxes has doubled since
1960 • all to pay the costs of expanding Federal programs.
•
- Government regulation has expanded rapidly, adding to the cost of all consumer
goods, impeding new industrial development, and substituting Washington-based
decisions for those of individuals, businesses, and State and local governments.




• During his first few days in office, the President:

- Took initial steps to bring government spending under control, including a freeze on
government hiring and procurement, reductions in government travel, and reductions in
the use of consultants and contracts.
- Created a task force under the direction of the Vice President to coordinate efforts to
reduce the regulatory burden, placed a freeze on new regulations, and withdrew
certain regulations issued in the final days of the Carter Administration.
NEW ACTIONS ANNOUNCED TODAY
In his address to a Joint Session of the Congress and in detailed economic and budget reform
messages, the President described his proposals and plans for:
. The first round of major reductions in Federal spending. Additional spending reductions
will be presented on March 10, 1981, in a full revision of the 1982 budget, Together, these
proposals will reduce FY 1982 spending $41.4 billion below current policy levels, they will
also result in $2.0 billion in user fees and $5.7 billion in off-budget cuts for a total of $49.1
in savings.
. A major reduction in individual and business taxes.
. Additional measures to reduce the cost, burden and intrusion of government regulations.
The principal effects of the President’s program, if it is approved by the Congress, will be to:
. Reduce inflation rates.
. Reduce the nonproductive burden imposed by the Federal government, particularly
through regulations.
. Reduce the heavy tax burden on the American taxpayer.
. Reduce the size and role of the Federal government, and its intrusion in decisions that
could better be made by individuals, businesses, and State and local governments.
. Reduce interest rates for credit purchases and borrowing of money by reducing
government borrowing made necessary to cover massive deficits.
. Increase real incomes by spurring capital investment and enhancing productivity .
The President’s proposals are summarized below and described more fully in documents being
sent to the Congress.
BUDGET OUTLOOK WITH THE PRESIDENT’S BUDGET SAVINGS AND TAX REDUCTION
PROGRAM.
Official budget estimates showing the President’s tax and budget savings proposals will be
provided in the March 10th revision of the 1982 Budget. The table below provides a
preliminary estimate of the renewed fiscal balance when the President’s measures are fully
implemented:
1981

1982

1983

1984

1985

1986

Proposed Outlay Ceilings

654.7

695.5

733.1

771.6

844.0

912.1

Receipts with tax plan

600.2

650.5

710.2

772.1

850.9

942.1

Target Deficit (-) or Surplus

-54.5

-46.0

-22.9

+ 0.5

+ 6.9

+ 29.9

23.0

21.8

20.4

19.3

19.2

19.0

21.1

20.4

19.7

19.3

19.3

19.6

Share of GNP
Outlays
Receipts




2

THE PRESIDENT’S BUDGET REFORM PLAN

In his address to the Joint Session and in a detailed Budget Reform Plan sent to the Congress,
the President described the first major steps in a comprehensive redirection of Federal
Government activity including:
.
.

Sharply constrained overall spending levels; and

.
A.

Cutbacks in lower priority Federal activities;

Dramatic shifts in internal budget priorities.

Past Actions Have Contributed to Today’s Economic and Budoet Problems.
The rate of increase in Federal spending has risen sharply over the past 25 years:
Average Annual Rate
of Increase
6.3%
11.9%
15.9%

• From 1955 - 1964:
• From 1976 • 1981:
• From 1979 • 1981:

Spending increased even more rapidly than tax revenues, which were pushed up by
inflationary movement of taxpayers into higher tax brackets.
The results have included increased tax burden, reduced incentives for working, saving
and investing and a slow down in the economy. As a result, Federal deficits and
borrowing continue to increase.
Also, national defense was underfunded because of the failure to control domestic
program expansion.
B.

New Priorities.
Achieving the President’s budget savings targets will require an end to the proliferation of
new Federal programs and a reversal of the trend toward greater Federal roles in econo­
mic and social programs. The President’s program stresses two overriding priorities:
. Sufficient budget resources must be provided to rebuild the Nation's defense
capacities;
. The Social Safety Net of income security measures erected in the 1930’s to protect
the elderly (including cost of living protection for the elderly), unemployed, and poor,
as well as veterans, must be maintained.
Beyond these two priorities, all other Federal programs are being subjected to thorough
scrutiny and widespread reduction.

C.

Criteria Used in Evaluating Programs and Funding Levels.
Eight basic criteria have been used in evaluating and making decisions on all other
programs:
1. Entitlement Programs must be revised to eliminate unwarranted beneficiaries and
payments.
2. Subsidies and benefits for middle and upper income levels must be reduced.
3. Allocable costs of government programs must be recovered from those benefiting
from the services provided, such as airports and airways, inland waterways and Coast
Guard services to yacht and boat owners.
4. Sound econom ic criteria must be applied to economic subsidy programs such as
synthetic fuels, Export-lmport Bank loans, and subsidized loans.
5. Capital investments in public sector programs — such as highways, waste treatment
plants and water resource projects — must be stretched out and retargeted.




3

6. Fiscal restraint must be imposed on programs that are in the national interest but are
lower in priority than the national defense and safety net programs.
Examples
include NASA, National Science Foundation, and the National Institutes of Health,
which would be allowed to grow at lower rates than planned.
7. Large numbers of categorical grants must be consolidated into block grants
permitting less Federal administrative overhead, greater flexibility for State and local
governments, greater efficiency in management and reduced overall costs. Examples
include elementary and secondary education, and health and social services.
8. Federal personnel and overhead costs, and program waste and inefficiency must be
reduced.
D. Maior features of the President’s Program
Major features of the President’s program include:
.

A $41.4 billion reduction in FY 82 outlays compared to the current policy base,
together with $2.0 billion in user charges and $5.7 billion in off-budget outlay
reductions for a total of $49.1 billion in fiscal savings.

. A dramatic downward shift in Federal spending growth rates, bringing the 16% trend
of the recent period to about 7% over the next several fiscal years.
.

A steady reduction in the Federal deficit, resulting in a balanced budget in 1984 and
modest surpluses thereafter.

• The first comprehensive proposal in more than a decade to overhaul the Nation’s
overgrown $350 billion entitlements system.
Proposed revisions of food stamp,
extended unemployment benefits, trade adjustment assistance, student loans, various
secondary social security benefits, medicaid and other entitlement programs would
save $9.4 billion in fiscal year 1982, with savings growing to $18.9 billion by FY 86.
. Substantial cutbacks or actual elimination of non-essential or ineffective Federal
programs, including CETA public service jobs, AMTRAK, energy technology
commercialization programs, impact aid, and Federal support for the arts.
.

Proposed consolidation of nearly 100 narrow categorical grant programs into a few
flexible block grants for State and local support of education, health, and social
services. Savings by FY 1983 would exceed $4 billion.

. Sharp reductions in direct Federal subsidies for synfuels development, Export-Import
Bank activities and the dairy industry, along with a substantial stretch-out of funding
for highways, airports, sewage treatment plants and water projects.
.

Increased user fees for barge operators, airway system users and commercial and
recreational vessels.

Specific program reductions proposed in the President’s Budget Reform Program are
listed by department and agency in the attached 10 page table. This table shows
esimated reductions in budget authority and outlays, as well as increased receipts from
user charges, for fiscal years 1981-1986.
E. A Stronger National Defense within Restrained Overall Spending Levels.
The President has decided that budget resources must be devoted to national defense to
improve and sustain the readiness of U.S. forces and to increase their ability to deter and,
should deterrence fail, to prevail in response to aggression against U.S. interests. The
defense budget has been reviewed closely to achieve cost savings. Part of the defense
growth will be financed by the savings that result from increased efficiency and reductions
in travel and other marginal activities.




4

The President has also decided that Federal spending growth must be held to 6% in FY
82 and that similar restraint must be exercised in future years. To provide $7.2 billion
extra for defense in 1982, overall spending levels must be reduced by $41.4 billion or by
6% from the current policy base.
The 83 major policy and program changes described in the President’s Budget Reform
Plan and listed in the appendix to this Fact Sheet provide most of the savings required in
FY 1982, with larger reductions in future years. In summary, the President’s Budget
Savings Plan would provide the following:

1981

Outlays Fiscal years ($ in Billions)
1982
1983
1984
1985

1986

657.8
1.3

729.7
7.2

792.1
20.7

849.0
27.0

911.4
50.2

972.8
63.1

659.1

736.9

812.8

876.0

961.6

1035.9

President’s Budget Plan
Proposed spending ceiling 654.7
Budget savings target
4.4

695.5
41.4

733.1
79.7

771.6
104.4

844.0
117.6

912.1
123.8

Existing budget status
Current policy base
Added Defense funds
Current policy base
with adequate defense

President’s Budget Savinas Proposals
Actions recommended now
or to be included in March
Budget Revisions:
Budget Outlay reductions 4.8
41.4
User charges (receipts)
(2.0)
Off-budget outlay
(5.7)
reductions
(.7)
Subtotal
(5.5)
(49.1)
Budget savings to be
proposed subsequently

58.5
(2.6)

73.7
(3.0)

86.6
(3.5)

95.8
(3.9)

(7.4)
(68.5)

(9.2)
(85.9)

(11.1)
(101.2)

(13.1)
(112.8)

21.2

30.7

31.0

28.0

F. The Resulting Shift in SDendino.
The shift in government spending priorities as a result of the rigorous review conducted
by the President and the Cabinet is shown in the tables below:
(Dollar amounts in billions)

1962

1981

1984

Department of Defense-Military...........
Safety net programs..............................
Net interest.............................................
All other...................................................

46.8
26.2
6.9

157.9
239.3
64.3
193.2

249.8
313.0
66.8
142.0

Total.........................................................

106.8

654.7

771.6

Department of Defense-Military...........
Safety net programs..............................
Net interest..............................................
All other...................................................

43.8
24.5
6.4
252

24.1
36.6
9.8
29.5

32.4
40.6
8.6
1&4

Total.........................................................

100.0

100.0

100.0

Outlay Shares (Percent)




5

G. The First Step in Budget Reform.

The Budget Reform Message forwarded to the Congress is the first step in the President’s
program to reduce budget deficits. The reform package provides details on 83 major
policy and program actions to achieve budget savings. These major actions are being
provided now to permit the Congress to begin work immediately and meet its schedule for
reconciling fiscal year 1981 spending levels and setting the course for fiscal year 1982.
H. The Fullv Revised 1982 Budget.
On March 10, 1981, the President plans to submit his fully revised 1982 budget to the
Congress. This new budget will provide details on the additional 1981 and 1982 budget
savings that are needed to achieve the President’s goai of a $41.4 billion reduction in
1982 outlays below the current policy base.
THE PRESIDENT'S PROPOSAL TO REDUCE TAXES
President Reagan’s plan for reducing taxes proposes:
. Reducing individual tax rates by 10% a year for 3 years.
• Increasing the incentive for productive investments by business and industry in new plant
and equipment by allowing more rapid write-off of recosts of investments.
A.

Reducing individual income tax rates. Tax rates will be reduced by 10% effective July 1,
1981; a second 10% on July 1, 1982; and the third 10% on July 1, 1983.
The net effect will be a 5% reduction in 1981 individual taxes, a 15% reduction in 1982
taxes, a 25% reduction in 1983 taxes and a 30% reduction in 1984 taxes.
1. Background. Individual tax burdens have been increasing steadily over the past few
years as inflation pushes individuals into higher tax brackets and social security tax
rates have increased. This has reduced the incentive to work and the ability to save.
2. Effect on tax rates. At present, under each of the four taxpayer rates schedules •
•
joint, single, married filing separately, and head of household -- individuals pay tax at
marginal rates ranging between 14% and 70%. When the tax cut proposed by the
President is fully implemented, rates will range between 10% and 50%.
3. Implementing the tax reductions. Under the President’s proposal, reductions will begin
July 1, 1981. At that time, withholding will be reduced by roughly 10% for individual
taxpayers.
4. Expected effects. The cut in tax rates will provide individuals greater incentives for
productive employment and for savings. Also, reduced tax rates will make tax shelters
less attractive and productive investments more attractive. Thus, cuts in individual
taxes are expected to contribute to increased investments that will expand the
productive base of the economy and create more jobs.

B.

Encouraging Productive Investments bv Business and Industry.
The second major part of the President’s tax proposals -• called the Accelerated Cost
Recovery System -- would establish a new system for treating investments by business and
industry.
This system will determine the periods of time over which the costs of
investments can be "recovered" or "written off" when calculating taxes. The system will
result in fixed periods, known in advance, over which the cost of investments in particular
plant and equipment can be charged off as expenses of doing business and thus
deducted from gross income before calculating taxes.




6

1. The New System.

Most business property will, for purposes of calculating taxes, fall into one of the three
write-off periods listed below. An accelerated costs recovery schedule is provided for
each.
-

3 years: This class consists of autos and light trucks and machinery and equipment
used for research and development. Expenditures can be written off in 3 years:
33% in the first year, 45% in the second year, and 22% in the third. An investment
credit of 6% will also appy to this class, up 2-2/3 percentage points from present
law for property written off in 3 years.

-

5 years: This class consists of other machinery and equipment, except for certain
long-lived public utility property. After a phase-in period, the original cost of
additions can be written off according to an accelerated 5-year schedule:
• 20% in the year acquired.
. 32% in the 2nd year.
. 24% in the 3rd year.
. 16% in the 4th year.
. 8% in the 5th year.
The full 10% investment credit will be allowed for this class.

-

10 years: This class consists of factory buildings, retail stores, and warehouses
used by their owners; and public utility property for which present guidelines exceed
18 years. The accelerated schedule for deductions is as follows:
. 10% in the 1st year

.

10% in the 6th year.

. 18% in the 2nd year.

•

8% in the 7th year.

. 16% in the 3rd year.

.

6% in the 8th year.

. 14% in the 4th year

.

4% in the 9th year.

. 12% in the 5th year

.

2% in the 10th year.

As in present law, the 10% investment credit applies to public utility property in this
class, but is not generally available for real property.
Specific depreciation periods, not requiring subsequent audit, would be established for
write-off of other depreciable real estate -- on a straight line basis (i.e., the same %
share of the original cost each year). These are:
-

15 years: for other nonresidential buildings, such as offices and leased stores and
for low-income housing.

-

18 years: for other rental residential structures.

2. Effective Dates.
The new system would be effective for property acquired or placed in service after
December 31, 1980.
A 5-year phase in period would provide progressively shorter
recovery periods for long-lived machinery and buildings acquired before 1985.
3. Principal Changes from the Current System.
The proposed new capital recovery system improves upon the current system in several
ways. Specifically, it would:




7

• Substantially increase the incentive for business investments for increased productivity,
higher real wages, and sustained economic growth.
• Provide the basis for creating new jobs.
• Improve U.S. competitive position in world markets.
.

Reduce the accounting and tax planning burden for taxpayers, by replacing the
current, complex concepts such as "useful life" and "facts and circumstances of the
anticipated use" which require estimates by taxpayers and later audit by IRS agents
and which result in years of dispute and litigation.

.

Reduce the auditing burden on the Internal Revenue Service.

Details of both tax proposals are being provided in material released by the Secretary of
the Treasury.
C. Estimated Receipts with the Tax Reduction Program.
The table below shows current estimates of receipts and taxes as a share of GNP —
before and after the President's Tax reduction program:
Fiscal years ($ in Billions)
1983
1984
1985

1981

1982

Current law receipts

609.0

702.4

807.6

917.2

1033.2

1159.8

Individual Income tax
reductions

-6.4

-44.2

-81.4

-118.1

-141.5

-162.4

Depreciation Reform

-2.5

-9.7

-18.6

-30.0

-44.2

-59.3

2.0

2.6

3.0

3.5

3.9

600.2

650.5

710.2

772.1

850.9

942.0

21.4

22.0

22.4

22.9

23.5

24.1

21.1

20.4

19.7

19.3

19.3

19.6

Proposed user charges
Receipts with new tax
policy
Share of GNP
Current Law
After tax reduction
program

-

1986

THE PRESIDENT’S PROGRAM TO REDUCE REGULATORY BURDEN
In his address to a Joint Session of the Congress, the President reviewed the actions taken
since January 20th and new steps to reduce the burden, cost and intrusion of government
regulatory efforts that are unnecessary, duplicative, inefficient, ineffective, or simply not
justified on the basis of benefits.
A. Actions Taken Since January 20th.
The actions taken by the President since January 20th include:
. Creation of a Task Force on Regulatory Relief on January 22, 1981. The Task Force
is chaired by the the Vice President and has seven cabinet-level members.
. Termination on January 29, 1981, of the Council on Wage and Price Stability’s
wage-price standards program which has been ineffective in halting the rising rate of
inflation, has proven unnecessarily burdensome and a waste of taxpayer money.




8

. Postponement of regulations on January 29. The President requested the heads of
12 departments and agencies to postpone, to the extent permitted by law, the
effective dates of regulations that would otherwise become effective before March 29,
1981, and to refrain to the extent permitted by law from issuing new regulations
during that same 60-day period.
. Withdrawal or modification of regulations. In response to the President’s request for
a close review of existing and proposed regulations, the Secretaries of Education,
Transportation, Labor and Energy, and the heads of EPA and OMB already have
modified or revoked a number of regulations.
B. New Actions Announced bv the President.
The President announced two additional actions in his continuing program to reduce
unnecessary regulation. These are:
• Issuance of an Executive Order designed to improve management of the Federal
regulatory process.
. Integration of the goals of regulatory relief with paperwork reduction, principally as is
carried out under the recently enacted Paperwork Reduction Act of 1980 which
provides, in effect, for OMB review of most regulations.




9

Chunges from Current
Suaniry Table of Hudgct Authority and O u t l a y SuvLngs by Agency
and increased to Governmental Receipts
F 1981 - 1966
Y
(In millions of dollars)

*•

Budget Authority and Outlay Savings

1981

1982

B
A
Department of Agriculture
Dairy price supports
(Commodity Credit
Corporation)...............
Kood Stamps................. .
Child Nutrition...........
Rural E lectrification
Administration ( o f f bud g e t ) ..«•***«•*»•••
(Loan guarantee
commitments)..........
Farmers H e Admin.. . .
om
(Direct loan
obligation s)..........
Alcohol Fuels/Blomass
Loans !/••.••••*•*•••
Subtotal.
Department of Commerce
economic and Keglonal
Development (including
Appalachian Regional
Comal•■Ion 2/ ) ...........
National Oceanic and
Atmospheric Admin....
Subtotal.

B
A

.....

138

150
145

150
42

( 38)

( 38)

( 187)

Subtotal.



1,828
1,657

1984

B
A

1,095
1,822
1,575

2,012

1,800

1985

B
A

1,614
2,004
1,709

2,462
1,934

B
A

1,887
2,451
1,835

2,636
2,046

I tea
Totals
B
A

1986
B
A

2,263
2,624
1,940

2,771
2,158

2,727
2,759
2,045

----

11,859
9,740

9,724
11,810
9,146

( 1, 142) ( 1, 142)

( 2, 328) ( 2, 328)

( 3, 603) ( 3, 603)

( 4, 975) ( 4, 975)

( 6, 450) ( 6, 450) ( 18, 536) ( 18, 536)

( 5, 495)

( 5, 935)

( 6, 405)

( 6, 925)

( 7, 480)

30

105

30

179

105

255

( 2, 354)

( 2, 354)

( 2, 354)

( 565)

179

331

( 2, 354)

255

( 32, 427)

407

( 2, 354)

569

1,307

( 12, 335)

505

94

153

505

46

800

406

3,485

4 t69l

1,842

5, 50$

4,501

6,432

4,861

7,161

5,184

7,941

502

24

769

440

854

644

934

755

1,010

882

1,085

997

5,154

3,742

9

6

152

69

202

148

238

216

250

253

241

223

1,092

915

511

30

921

509

1,056

*92

1,172

971

1,260

1,135

1,326

1,220

6,246

4,657

68
360

68
280

2,387
840

2,387
530

3,736
1,360

3,736
1,050

4,152
2,180

4,152
1,700

4,369
2,860

4,369
2,400

4 t 544
3,560

4,544
3,000

19,256
11,160

19,256
8,960

428

348

3,227

2,917

5,096

4,786

6,332

5,852

7,229

6,769

8,104

7,544

30,4 1 2fl , 216
6

itary
Pe rsonne1••.•
Program and a ll other.

1983

22,673 32,140

Summary T ab ic ( c o n ' t )
(in M illio n s of d o lla r s )

B
A
Department of Education
Eleecntary and
Secondary Crants
Conaolldatlon.............
School Assistance In
la Federally Affected
Areas (lepact Aid)***
Vocational Education*•
Student Assistance***•
National Institute of
EducatIon.....................
In itltu ti of Huseua
Services........ .............

1981

1982

0

B
A

1983

0

1984

I9H
5

(ten
TotnlH

1986

B
A

0

B
A

0

B
A

0

B
A

0

B
A

0

1,498
67
:----

338

106

.. ,

1,761

1,217

1,998

1,766

2,366

2,051

2,617

2,272

10,240

7,412

474
236
1,016

450
220
803

523
242
1,659

500
242
1,499

567
259
1,857

551
252
1,808

608
277
2,074

584
269
2,019

632
294
2,287

613
283
2,233

2,871
1,308
9,231

2,780
1,266
8,468

20

82

----

106

22

22

20

23

20

25

21

27

22

117

105

12

2

14

12

15

13

16

14

18

16

19

18

94

75

417

190

3,258

1,613

4,222

3,491

4,716

4,411

5,368

4,960

5, 8*6

57441

23,661

20,106

545
70
99
148
254

275
59
79
37
66

1,028
373
363
186
677

864
361
365
156
310

1,064
522
428
178
597

859
433
414
177
611

362
605
372
178
427

676
549
406
170
589

140
676
330
169
374

224
657
330
158
433

25
602
275
176
373

256
604
275
163
373

3(164
2,848
1.867
1,035
2,702

1.154
2,663
1,869
861
2.382

13
33

3
33

38
150

27
127

62
138

62
140

67
131

67
132

73
127

73
123

78
118

78
117

311
697

310
672

745
5

114
4

----

29
29

61

15
61

_
_

45

13
43

_
_

40

72

15
72

84

15
84

745
307

201
293

SubtoteI.****.***.* TTfTT

57o

2,ft5*

268

3,634

2,>52

27251

2,645

T75ST

2,o 4s

l,)S l

1,965

---*—
----

1,000
550
700

---—
—
—

1,100
1,175
1,200

----------

1,100
1,700
1,500

------—

1,100
2,225
1,700

1,100
2,750
1,700

----

---------

5,450
8,465
6,820

520
1,237

520
1,013

670
2,213

670
1,986

722
3,166

722
2,930

795
4,181

795
3,916

824
5,318

824
5,021

1,531
16,468

1.531
14,966

2,697

2,540

3,148

2,993

3,512

3,347

3,863

3,676

4,084

3,929

Pep.irtaent ofc Energy
Synthetic Fuels*.**•••
Fonsll Energy.•••........
Solar Energy•••••*••••
Other Energy Supply***
Energy Conservation*. .
Energy Information and
Departmental Overhead
Energy Regulation.****
Alcohol fuels
Subsidy \J.........
General Science••••••*

Departeent of Health and H an Services
um
Social SecurityMtnleue Benefits........
.....
50
D isability Insurance*
---65
Student Benefits•••••
---20
Aid to Fanillea with
Dependent Children***
*
*
Hedlcald........................
353
100
Health and Social
Services grant
Cenaolldatlon 3/.* * * «
------


. . . .

• ___

---------

13,696 12^*65

Summary T a b le ( c o n ' t )
(In n l l ll o n s

1961
'BA
Regulation of Health Care
Industry
-PSRO*$•••••••«■•••••
(PSRO oblig a tion s)**
National Institutes
of Health 4/•*••••*••
Health Professions
£ducation *••••••••••*
Health Haintenance
Organisations»•*•*•••
National Research
Service Awards
Merchant Seaaen
( PHS) V
National Health Service
Corps Scholarship****

1982

0

of d o lla r s )

1983

1984

1985

1986

B
A

0

B
A

0

B
A

0

B
A

0

B
A

Item
Totals
0
B
A

0

28
6
( 38)

10
38

100
15
( 119)

62
117

168
19
( 136)

87
134

180
27
( 215)

159
212

190
29
( 227)

(88
221

199
1
1
( 238)

197
214

126

54

197

145

373

336

512

468

628

584

726

682

2,562

2,269

219

32

280

126

309

221

336

260

361

297

385

313

1,890

1,249

37

6

24

18

57

27

66

50

69

61

72

73

325

215

4

1

5

4

5

4

6

6

6

5

7

6

13

26

39

39

no

no

183

183

194

194

205

205

215

215

946

946

16

3

31

14

45

37

54

45

65

54

80

65

291

218

7,190 10,153

8,795

12,693

10,392

15,029

11,941

17,109

6,919
Department of Housing and Urban Developaent
34
3
Planning Assistance****
Rehabilitation Loan

865
127
( 971)

701
95B

44,162 62,321

37

26

39

36

42

39

44

41

46

44

242

189

130

Neighborhood Self-Help
Devclopaent*••••••••••
Cosnunlty Development
Support Assistance****
Subsidised Houslog
-progran le v e l••**••*•
-rent contributions***
Public Housing
Solar Energy and




63

130

191

134

210

138

211

140

213

142

214

814

I ,102

8

4

10

9

1
1

10

1
1

1
1

12

1
1

12

1
2

64

57

584

12

678

67

837

271

882

702

926

814

3,536
4,916

10
232

3,026
4,574

39
538

3,440
5,587

95
1,018

3,437
6,066

223
1,748

3,624
6,269

171
2,445

800

20

800

60

800

100

4,000

180

868

799

----

500

1
9

800

800

( 300)**

121

47

132

149

141

137

150

147

158

157

166

162

793

127

10, 1*5

629

9,403

1, 03>

11,005

1,812

11,519

3,155

1 ,985
1

4.162

1,907

1,866

719
17,061
27,912 5,990

54,870 10,922

Sunaary Table (coo't)
(In ot Ilions of dollars)

IMI
ta

r"

8A

1982

0

8A

1981
0

8A

1984

0

8A

1985

0

8A

1986

_ 0
_

I tea
Total a
8A
_ 0
_

Ptpirtiiot of tHt U ttrlor
U profii urtcttng of

CMMrVAtlOi t tp ld -

lturea««*.....................
Vouili Coasirvatioft
Corn.............................

91

566

270

512

286

465

365

471

349

605

403

3,192

1,764

36

52

60

59

60

60

60

60

60

60

60

60

336

351

Subtotal.................. .

^
U

373

829

IJI

JIT — m

— 571

nr

— 5H

— JT5 — WT

T 75W

2,115

523

700

1,231

700

477

100

196

100

284

200

287

2,200

2,998

-nr-r

----

----

----

285

—

285

----

272

----

264

----

1,106

60

175

175

175

175

181

181

183

183

183

183

957

937

r

1,150

1,150

760

760

380

380

380

380

380

380

3.050

3,050

633

4v
644

3,566

4,236

4V
073

4,578

4,408

4,946

4,762

5,341

5,143

33

250

179

256

2a

262

262

269

268

275

274

1,312

1,284

102

102

114

114

126

126

138

138

151

151

631

631

"1 , 1*1

6,132

T T I 5I

"T^nc

i,W

M J6

4, 6*2

Si, 64*

U .t l l

PiMrtitBt of Labor
Unooployoeftt tnauraoceCxteoded Benefits........
400
OHM^loyifliK InauraoeoV C TOat
O lt
•••••••
'■ 1 ■
1
tfneoployoeat *eoa^Maatloo for as-service
•aobora#»««*••••••••••
60
Trado Adjuatoent
Aaetataace••••••••••••
■
CoapnhMBlvi lopleyoeot Ml Training
(CBTA)...........................
133
foam Adult Cooaerv it l t i Cocpo
M o r a l oopleyeea to Jury
coopoaaatioo (RCA)«»«
—

w k u u i ...................

nr

Popart—at of Tranaportatioo
M o r e l ll|Way
Goootmct too* •••••••• • r ■"
■
Urban Haoa TraoeportetlooCapital Cranta*.**.**
210
Operating Sobaldloa..
—
Airport Construction.•• 272
A T A SobaUUa...........
MR R
25
Mortboaat Corridor
lopreveoeat Project. . .
—
Low voIum railroad
broocb II nee••••••••••
80
Highway Safoty Granta.• —
Cooperative Automotive
teooarch Prograo.........
12
Subtotal••••••••••



—

— in

— nr — m

23,898 22.587

i,i7 i

J ft ii
o

■■
-

1,390

244

1,964

1,211

2,546

1,700

3,243

2,088

3,437

2,234

12,580

7,477

----

31

120
23

950
103
250
431

270
96
140
325

1,047
581
278
606

545
256
181
485

1,220
1,059
305
760

973
600
196
688

1,368
1,528
130
964

1,284
1,083
219
904

1,497
1,626
371
1,056

1,480
1,356
239
1,030

6,292
4,897
1,806
1.842

4,585
1,391
1,075
1,477

25

288

95

-13

114

20

51

15

25

----

----

310

310

8

88
167

32
16

96
125

62
112

104
138

80

112
162

103
150

119
178

no

tis

163

599
770

195
579

9

14

14
4,447

16

1
4

17

15
6.M 7

*7

7
1

“f,TW

13
2,939

13

" 1,227

i n 8!

IIYW0

----

6

13
i;w u

T jn

^,8/0

StMMAry Table ( c o n ' t )
(In u t l l l o n s of d o lla r s )

8A

1981

Other Independent Agencies
E A Waste Treatment
P
Crania »•••«••••••••••• 1,000
Civil Aeronautics
ioard-Airline subsidy*
---CorporatIon for Public
Broadcaatlng...••••••• ---Export-Inport lank........
750
FortlfM Aid (fAP)t«*«»*
616
National Consumer
Cooperative Sank.........
91
National Endowment for
the Arts/Hunaaltlee..
---National Sclnncs
Foundation*.••••••••••
63
OfClco of PirsAMtl Hmagopsnt
Institution of annual
Postal Service Subaidlea
Student Loan Harbating
Association ( o f f -

250

I9IH

1985

Ilea
Totals

1986

B
A

0

B
A

0

B
A

0

B
A

0

B
A

0

3,610
330

125
241

1,540
248

1,045
334

1,860
-90

1,970
86

2,170
-390

1,960
-156

2,465
-200

1,950
-124

12,645
-27

7,050
441

56

50

64

66

54

54

34

34

2

2

210

204

60
85

43
1,980
1*854

63
410
402

52
2,110
205

52
990
586

73
2,250
2,513

73
1,380
1,063

98
2,410
2,978

98
1,600
1,527

2,560
3,187

111
1,710
1,827

377
12,060
11,353

371
6.150
5,488

82

136

128

160

152

185

178

185

175

200

190

957

905

165

85

186

131

203

193

222

223

239

231

1,015

863

26

66

15

90

81

120

109

153

141

183

135

675

527

250

558
632

510
632

472
690

426
690

430
765

389
765

416
779

366
779

417
779

367
779

2,293
3,895

2,056
3,895

60
_
_

95

90

_

360

( 1*300)

337

—

565

( 3, 000)

564

—

515

( 3. 500)

514

lit

----

215

( 4, 000)

217

---- ( 14. 923)

1.710

1,702

( 1*449) ( 1. 449)

( ---- )

( 30)

( 50)

( 296)

( 296)

( 685)

( 685)

( 439)

( 439)

( 179)

( 179)

(— >

( 35)

( 35)

( 28)

( 28)

( 43)

( 43)

( 57)

( 57)

( 20)

( 20)

( 183)

( 181)

( ---- )

( 10)

( 3)

( 16)

( 13)

( 17)

( 16)

( 19)

( 18)

( 16)

( 18)

( 78)

( 70)

-250

600

300

350

300

300

150

150

\
550

r^nr “ TTW

“ TTW “TTfTT

100

100

TffTJW T r a

1,190
u jn

1.150

386

250

— iu

s r n

386

250

« ,W

T 3 JT

4, 74/

1,342

1,362

1,811

1,811

t,264

2.264

2,763

2,763

3,263

3,263

11.829 11,829

2,165

m w . .................... .-x m




19ft)

( 1. 923)

Vater Beeource Development
Construction program.
—
Corps of Engineers... ( —- )
Hater 6 Power fteeourcee
Service• • • «• • • • *• (■ ■ *)
Soil Conssrvatloo
S e r v i c e »••••••••• (■■")
0 4 . 8a11way Aaooclatlon
Confall subsidies••••• - 350#

Fsderal fersonnsl
Seduction Mt
related to above
.................................... .
Effecta on civilian
agency pey coata of
revising the Federal
Pay Coopsrablllty
Stsndard........•.•••••••
Mineral Leaalng on
Outer Continental
Shelf and Fedoral
Unds 6/ ........................

0

_____ 1 1 2
91
0
B
A

2,079

2,938

2,907

1,463

3,356

3,740

1,698

3.990

3,873

16,296 15,911

800

800

2,000

2,000

M 00

3,100

3,500

3,500

3,500

1,500

13,150 11,150

Summary T a b le ( c o n ' t )
( i n m lllion ti o f d o l l a r s )

*****
—
TOTAL* On-Budget Authority
•nd OutUy S.vln g.. 10.661

_____ 1W

0
*,767

B
A

_____ 19ft3

0

54,666 34,757
— “ “ “

Off-budget Items Rural E lectrifica ­
tion Admlnlstrst lo o .
38
(Loan guarantee
commitments)» . . . ( 187)
Student Loan Marketing
Association.............
.....
TOTAL, Budget Authority
and Outlay Savings. 10*699
•

14
U
2/
3/
?/
T/

6/

38

1,142

1*142

( 5*495)
.....

4,805

.....

_ BA_

_____ I9B4_

0

55*808 37,822

0

B
A

1tom
Totals
B
A

1986

0

B
A

58,810 50,109

69,082 61,365

76,618 70,232

82,654 77,325 352.491 298.555

— —

——— — —

......

......

......

......

4,975

6,450

6,450

2*328

— —

2*328

( 5, 935)

1,923

B
A

1985

----

3,603

3,603

( 6, 405)

2,500

61*138 54,937

----

4*975
( 6, 925)

3,000

72,685 67,968

—

( 7, 480)

3,500

81,593 78,707

—

.......

18,336 18,536
( 32, 427)

4,000

—

14,923

89,104 87,775 371,027 332,014

Less than $$60 thousand
Deferral
The appropriations for the Alcohol Fuels and Biomass programs are In the Department of the Treasury.
Funds for the Appslachlan Regional Commission are spproprlsted to the President.
Some of these savings are to be derived from agencies other than the Department of Health and H an Services.
um
elimination o f Rational Research Service Awards is also included In National Institutes of Health reduction.
These savings to the Public Health Service w ill be partially offset by additional costs to the U.S. Coast Cuard, the Merchant
Marine and several other agencies.
Offeet included for Departmemt o f Interior operating costs and payments to states.




..I ...

II*

O ther R e d u ctio n s to th e D e f i c i t
(in a illio n s o f d o lla r s )
1983
1984

1981
30

B lack Lung T ru st Fund r e f o n . . . . . . . . . . . . . . . . . . .
S m a ller r e d u c tio n s ( f o r a g e n c ie s l i s t e d above
and Cor o th e r a g e n c ie s ) th a t have been
i d e n t i f i e d ( o u t l a y s ) . .«••••••••••••«••••••••

1982

378

354

353

382

469

6,300

8,000

12,000

16,000

18,000

~~

1985

1986

T o t a l , Other r e d u c tio n s to the budget
d e f i c i t .....................................................................

30

6,678

8,354

12,353

16,382

18,469

O ff-b u d g e t l t e a s :
S a a lle r r e d u c t io n s th a t have been i d e n t i f i e d .

706

2,617

2,565

2,603

2,637

2,615

736

9,295

10,919

14,956

19,019

21,084

T o t a l , O ther r e d u c t io n s t o th e d e f i c i t ,
in c lu d in g o f f - b u d g e t i
t
e
a




s

I ll*

I n c r w M i t o C o v e ra g e n t«l R e c e ip ts

1982

Corps o f E ngineers
Inland Waterway User Charges
In crea a e f u e l tax to r e c o v e r o p e r a t io n ,
M aintenance, and replacem ent c o s t s and
c a p i t a l c o s t s on new waterw ays••«.••••
T ra n sp o rta tio n
Coast Cuard
P h ase-in fe e s f o r Coast Cuard S e r v ic e s .

H
*
"J

F ederal A v ia t io n A d m in istra tion
In cre a se t r u s t fund taxes t o c o v e r a l l
o p e r a tin g e x p e n s e s .. . . . . . . . . . . . . . . . . . .
S u b t o t s l...........................
T o t a l , in c r e a s e s t o g o v ern a en ta l
r e c e ip t s ........ . . . . . . . . . . . . . . . .




( in B illio n s o f d o lls r s )
1983
1984

1985

1986

258

275

300

315

100

200

300

400

500

1,882

2,159

2,442

2,753

3,104

1.982

27359

2,742

3,153

3,604

1.982

2,617

3,017

3,453

3,919

IV .

S u n a r y e f f e c t s on the d e f i c i t

1981

u

t

l

a

y

In crea ses t o governm ental r e c e ip t s (T a b le I I I ) .

(in a ll l lo n s o f d o lla r s )
1983
1984

1985

1986

4,767
30

L iste d o u tla y savin gs (T a b le I ) . . . . . . . . . . . . . . . .
Jther o u t la y re d u ctio n s (T a b le I I ) . . . . . . . . . . . . .
T o t a l, e f f e c t on o

1982

s

34,757
6,678

50,109
8,354

61,365
12,353

70,232
16,382

4,797

41 ,

58, U 3

737713”

8£ , 6 l 4

1,982

2,617

3,017

3,453

3,919

—

77,325
18,469

T o t a l, e f f e c t on the budget d e f i c i t . . . .

4,797

43 , 41)

61,080

76,735

90,067

99,713

O ff-b u d g et o u tla y s l i s t e d above (T a b le I ) . . . . . .
^ Other changes in o ff-b u d g e t e n t i t l e s th at have
oo
been i d e n t i f ie d (T ab le I I ) . . . . . . . . . . . . . . . . . . .

38

3,065

4,828

6,603

8,475

10,450

706

2,617

2,565

2,603

2,637

2,615

744

5,682

7,393

9,206

11, U 2

13,065

5,541

49,099

68,473

85,941

101,179

112,778

T o t a l, o ff-b u d g e t c h a n g e s* .......... ..
E ffe c t on the d e f i c i t , in c lu d in g e f f e c t s on
o ff-b u d g e t e n t i t i e s . . . . . . . . . . . . . . . . . . . . . . . . . .







II. F a c t S h e e t




P r e s id e n t R e a g a n 's I n itia tiv e s to R e d u c e R e g u la to r y B u r d en s




THE WHITE HOUSE
Office of the Press Secretary

EMBARGOED FOR RELEASE UNTIL
9 P.M. (E.S.T.), Wednesday, February 18,1981

February 18,1981

FACT SHEET
President Reagan’s Initiatives to Reduce Regulatory Burdens
Summary: President Reagan today announced the details of a far-reaching program to reduce
the burden of Federal regulations and paperwork, and to reduce the intrusion of the Federal
Government into our daily lives.
BACKGROUND
. During the campaign, President Reagan promised swift action to ease the economic
burden of government regulation.
. Previous administrations have instituted programs to manage the regulatory process. But,
despite these measures, regulations have continued to proliferate, often based on
inadequate analysis of the costs and benefits that would result.
• During the last month of the Carter Administration, regulatory agencies in the Executive
Branch issued more than 150 final regulations. Of these so-called "Midnight Regulations,"
over 100 were scheduled to become effective within the next 60 days. Many of these new
regulations impose substantial new burdens on the economy.
. Often, the high cost of regulatory compliance is due to the cumulative effect on an
industry of many agencies’ rules, rather than to a single major rule. For example, at least
five Federal agencies directly regulate the auto industry, and these five agencies are now
considering more than 50 significant new auto rules.
. This year, the Federal government is forcing Americans to spend over a billion hours
providing information to the government.
ACTIONS TAKEN SINCE JANUARY 20
Since taking office on January 20th, the President has taken a number of actions as a part of
a broad effort to free the economy, wherever feasible, of the hidden tax of complying with
Federal rules and paperwork requirements which do not contribute to the public welfare. This
effort will also seek to assure that regulations essential to the goal of protecting the public
health and safety achieve their goal in the most efficient manner.
1. Task Force on Regulatory Relief
President Reagan announced the creation of a Presidential Task Force on Regulatory
Relief on January 22, 1981. It is chaired by the Vice President. The other members are
the Secretary of the Treasury, the Attorney General, the Secretary of Commerce, the
Secretary of Labor, the Director of the Office of Management and Budget, the Assistant
to the President for Policy Development, and the Chairman of the Council of Economic
Advisers.
This Task Force has ongoing responsibilities which will be reinforced by the President’s
Executive Order on Federal Regulation. The Task Force will:




.

Review major regulatory proposals by executive branch agencies, especially those
proposals that would appear to have major policy significance or where there is
overlapping jurisdiction among agencies.

.

Assess executive branch regulations already on the books, especially those that are
burdensome to the national economy or to key industrial sectors.

• Oversee the development of legislative proposals in response to Congressional
timetables (e.g., the Clean Air Act must be reauthorized this year), and codify the
President’s views on the appropriate role and objectives of regulatory agencies.
.

Seek to increase public awareness of regulations and their impact, including
regulatory expenditures that do not show up in the Federal budget.

.

Make recommendations to the President on regulatory personnel and how to reform
regulation through Executive Orders, agency actions, and legislative changes.

2. Termination of CWPS’s Waae-Price Program
On January 29, President Reagan issued Executive Order 12288 terminating the Council
on Wage and Price Stability’s wage-price standards program.
The Council on Wage and Price Stability (CWPS) was created in 1974 to study and
encourage wage and price restraint, monitor inflation in the economy, encourage
productivity, and review the inflationary impact of government programs and regulations.
In 1978, President Carter directed CWPS to establish a program of "voluntary" wage and
price standards.
The Office of Federal Procurement Policy was ordered to issue
regulations denying Federal contracts to violators of these standards. The CWPS staff
grew from approximately 50 to 238 in 1979. As of January 20, 1981, employment was
170.
The CWPS program of wage-price standards proved ineffective in halting the rising rate
of inflation. It proved to be an unnecessary burden on labor and industry, and a waste of
taxpayers' money.
About $1.5 million will be saved in 1981 by this action, employment in the Executive
Office of the President will be reduced by about 135 people, and Federal requirements
that businesses submit voluminous reports will be ended. Companies spent some $300
million to comply with the reporting requirements alone of this program (more than 5,000
company reports were submitted to CWPS). CWPS’s small regulatory staff will work
closely with OMB and the Presidential Task Force on Regulatory Relief to carry out the
program of regulatory relief.
3. Postponement of Pending Regulations
On January 29, President Reagan requested the heads of 12 departments and agencies,
to the extent permitted by law, to postpone the effective dates of regulations that
otherwise would have become effective before March 29 and refrain from issuing any
new final regulations during this same 60-day period. This suspension in the effective
date of new regulations was to:
• Allow the new Administration time to review the "midnight" regulations issued during
the last days of the Carter Administration to assure that they are cost-effective and in
concert with this Administration’s policies.
• Allow time for this Administration’s appointees to come aboard and to become familiar
with the details of the various programs for which they will be responsible.
.

Allow time for this Administration, through the Presidential Task Force, to develop
improved procedures for management and oversight of the regulatory process.




2

The request was sent to the heads of the Departments of Agriculture, Commerce,
Education, Energy, Health and Human Services, Housing and Urban Development,
Interior, Justice, Labor, Transportation and Treasury, and the Environmental Protection
Agency.
With certain exceptions, the effective dates of all rules that would have become legally
effective during the 60-day period have been extended. The Office of Management and
Budget has received and has granted several requests for waivers of this regulatory
suspension. Most such cases involve regulatory actions necessary for economic activity
to go forward.
4. Initial Regulatory Actions
The program of regulatory relief is underway. Several cabinet departments and agencies,
on their own initiative and in coordination with the President’s Task Force, have taken
action on several significant issues:
.

On February 2, the Secretary of Education withdrew the proposed bilingual education
rules. These rules would have required all school systems to offer bilingual instruction
to each child whose primary language is other than English.
The Department
estimated that the proposed rule could have cost up to $1 billion over the first 5 years
of the program and an annual maintenance cost of between $72 million and $157
million thereafter.

.

On February 9, the Secretary of Transportation proposed a one-year delay in a
regulation which would have mandated the installation of passive restraints, beginning
with large cars, in September 1981. The implementation of this regulation could have
resulted in consumers paying as much as $800 more per vehicle equipped with air
bags. Moreover, this requirement would have hit U.S. auto producers hardest. Before
the government imposes additional costs on the consumer and puts an additional
financial burden on an already troubled industry, it must be sure that such an action is
warranted. A one-year delay will provide the opportunity for such an evaluation.

.

On February 9, the EPA asked the D.C. Court of Appeals to remand to it a rule setting
noise emission standards for garbage trucks. This request set in motion a process in
which EPA will review regulatory alternatives suggested by the garbage truck industry.
During this review, EPA will not enforce any aspect of the rule. When the rule was
issued, EPA estimated that it would cost $25 million annually to comply with the rule,
most of which would be borne by municipalities.

«

On February 12, the Secretary of Labor announced action on three major rules.
-

An OSHA rule requiring that chemicals in the workplace be labeled was withdrawn
for reconsideration. This rule, if issued in final form, would have cost between $643
million and $900 million initially, and between $338 million and $473 million annually
according to Labor Department figures. Lower-cost means of assuring worker
protection will be sought.

-

New rules under the Fair Labor Standards Act were postponed indefinitely. These
would have raised the salary levels used as tests, in part, to determine whether
executives must be paid overtime. This would have cost employers over $50 million
annually, would have reduced employment opportunities, and would have raised
prices, especially in the fast foods industry.

- The implementation of new rules under the Service Contract Act was postponed.
These rules would have extended Davis-Bacon "prevailing wage" principles to
those timber sales, automatic data processing, and research and development firms
under contract with the Federal government. The Department estimated that these
rules would have cost at least $68 million annually.




3

.

On February 14, OMB withdrew the policy memorandum on Federal Support for
Hospital Construction issued by the previous Administration. This policy set out an
elaborate review process to prevent Federal support for unnecessary hospital
construction and renovation projects. In the Administration’s judgment, the objectives
of the policy could be met more simply and effectively through other means.

.

On February 17, the President rescinded the mandatory Federal controls on building
temperatures which had been imposed by the previous Administration. This action
allows operators of non-residential buildings to choose the methods of conserving
energy that best suit their circumstances.

• On February 17, the Secretary of Energy took several actions:
-

-

.

Announced that national energy efficiency standards for major household
appliances will not be issued until a thorough review is completed. The 1980
proposal would require producers to redesign, by 1986, virtually all existing models
of these appliances and to retool their production lines. As a result, many small
firms would probably be forced out of business. Consumers would face sharply
higher purchase prices —about $500 million annually. Low-income families could
be especially hard-hit, since the standards would prohibit continued production of
the kinds of lower cost appliances they can afford.
Withdrew proposed standby energy conservation measures involving a compressed
work week, vehicle use stickers, and the part of the employer-based commuter and
travel measures concerning working hours and transit subsidies. In addition, the
Secretary has proposed to withdraw several interim final measures, including
odd-even day motor fuel purchases, additional employer-based commuter and
travel measures, increased enforcement and/or reduction of the 55 m.p.h speed
limit and mandatory temperature restrictions. This action will remove measures
which, if implemented, would interfere excessively in the daily life and business of
Americans.

On February 17, the Director of OMB revoked the Department of Energy’s clearance
under the Federal Reports Act for the collection of industrial energy consumption
data.. A number of respondents have provided data which demonstrated that the
information requested is needlessly detailed and unduly burdensome. This action will
terminate the collection of industrial energy data for sites not subject to Federal
regulation and preclude the Federal Government from expanding its regulatory
programs.

• On February 17, President Reagan revoked Executive Order 12264, which established
a cumbersome, duplicative and burdensome regulatory policy regarding the export of
some hazardous substances. The rescinded Executive Order would have threatened
American workers’ jobs and could have disrupted production abroad where affected
U.S. exports serve as vital material inputs. Procedures already exist which inform
foreign governments of hazards associated with exported American products. Thus,
each foreign government can decide for itself whether to import the products and
what precautions to take.
NEW ACTIONS ANNOUNCED BY THE PRESIDENT
Building on the steps taken since January 20th, today the President announced the following
additional actions taken by his Administration:




4

1.

The Executive Order on Federal Regulation

Yesterday, the President signed a new Executive Order designed to improve coordination
and management of the Federal regulatory process. This Order will produce better
quality regulation and reduce the excess burden of regulation on the American people.
The Order:
> Instructs the agencies on what is expected of them with respect to their regulatory
work and provides reassurance to the American people of the government’s ability to
control its regulatory activities.
• Charges the Office of Management and Budget with administering the new order,
subject to the overall direction of the Presidential Task Force on Regulatory Relief.
• Emphasizes that: regulatory decisions should be based on adequate information;
actions should not be undertaken unless the potential benefits to society outweigh the
potential costs; and regulatory priorities should be set on the basis of net benefits to
society.
.

Directs agencies to determine the most cost-effective approach for meeting any given
regulatory objective, and requires that factors such as the economic condition of
industry, the national economy, and prospective regulations be taken into account.

. .Requires each agency to perform certain tasks as part of the development of an
important regulation. A Regulatory Impact Analysis is required to evaluate potential
benefits and costs in light of the regulatory objectives. A determination must be made
that any proposed rule is consistent with applicable legal authority and Presidential
policy and that it reflects careful evaluation of the comments of all persons affected by
or interested in the regulation. The Task Force is to oversee this process; the Office
of Management and Budget is to make substantive comments on regulatory analyses,
help determine which new and existing regulations should be so analyzed, and
oversee the publication of semiannual regulatory agendas.
2. Integrating the Goals of Regulatory Relief with Paperwork Reduction
The Administration's program to reduce regulatory burdens will be integrated with its
program to implement the Paperwork Reduction Act of 1980. During 1981, given present
requirements, Americans will spend over 1.2 billion hours filling out government forms.
This is equivalent to the annual labor input for the entire steel industry.
The costs of Federal paperwork and regulation discourage Americans from opening small
businesses, doctors from accepting Medicare patients, and State and local governments
from requesting needed Federal aid.
The Office of Management and Budget has
exercised some control over the paperwork burdens of the cabinet departments since
1942. Last year, OMB supervised an effort which resulted in a reduction of almost 10
percent in the burden imposed by agencies subject to OMB Federal Reports Act
authority. However, agencies not subject to OMB information collection review increased
their paperwork load last year by more than 10 million hours.
The Paperwork Reduction Act of 1980 brings the independent regulatory agencies under
OMB authority, directs that the paperwork burden be reduced by 15 percent by October
1, 1982, and relates the effort to reduce paperwork burden to the need to minimize
regulatory burden.
This Act creates an Office of Information and Regulatory Affairs within OMB and directs
the agency to review Federal regulations that contain a recordkeeping or reporting
requirement under a variety of different procedures. It provides that no agency may
impose civil or criminal penalties on any person who fails to comply with a recordkeeping
or reporting requirement that has not received OMB approval.




5

3. Future Candidates for Regulatory Review
The Administration has completed a comprehensive initial review of the regulations of 14
key regulatory agencies, and has prepared a list of 100 rules which are potential
candidates for more intensive review.
.

Agencies covered included: Departments of Treasury, Justice, Interior, Agriculture,
Commerce, Labor, Health and Human Services, Housing and Urban Development,
Transportation, Energy and Education, and the Environmental Protection Agency, the
Equal Employment Opportunity Commission and the Office of Management and
Budget.

* Of the 100 rules identified for additional review, 50 are now under development in the
agencies and 50 are existing rules which need thorough review and possible revision.
A list of these regulations and brief information on them is attached. The regulations
now under development can usually be withdrawn, modified, or cancelled by the agency
head at his or her direction. In the case of existing rules, the agency head will have to
issue a new notice of proposed rulemaking and follow usual procedures before making
substantive change. That is, revision or withdrawal of these existing rules would require
that the agency propose the revision or withdrawal and obtain public comment before
taking final action.
4. Legislative Changes
The Administration will examine all legislation that serves as the foundation for major
regulatory programs.
This review will be led by the Presidential Task Force on
Regulatory Relief and will result in recommendations to reform these statutes.
Not all of our regulatory problems can be solved satisfactorily through more effective
regulatory management and decision-making.
Statutory constraints often preclude
effective regulatory decisions. Also, the Administration’s efforts to better control the
regulatory process may, in some cases, require further Congressional action.
For
example:
• Many of the statutes are conflicting, overlapping, or inconsistent.
Some force
agencies to promulgate regulations while giving them little discretion to take into
account changing conditions or new information.
Other statutes give agencies
extremely broad discretion, which they may sometimes exercise unwisely. Statutes
should not force agencies to promulgate inefficient regulations: they should provide
agencies with requisite discretion and sufficient direction so that they act wisely.
.

Compliance deadlines are often established in various laws. In general, they are
imposed to ensure that agencies move forward expeditiously in implementing the law.
However, these deadlines are often impossible to meet, especially if the rules
developed are to be based on adequate information. Deadlines in statutes also
constrain agencies’ ability to tailor rules to the economic conditions of the affected
parties. Where deadlines are unreasonable, changes will be sought.

Over the past few years numerous procedural reforms have been introduced in Congress
that would respond to increasingly burdensome and intrusive regulations being imposed
by the Federal Government. They have included requirements for regulatory analyses, an
across-the-board
legislative veto, and broader judicial review of the substance of
regulations. While supportive of the goals of such proposals, the Administration is
concerned about legislation that may result in excessive layering of review or an undue
broadening of control responsibility. Legislative proposals should be developed in a
manner to ensure they do not make the process even more complex, increase the size of
the federal bureaucracy, make it more difficult to make needed changes in regulations,
create additional delay and uncertainty, or contribute to the waste that results from the
current adversarial nature of the rulemaking process.




6

I I I . A d d r e s s b y t h e P r e s id e n t t o a J o in t S e s s io n o f C o n g r e s s







A D D R E S S B Y T H E P R E S ID E N T
T O A J O IN T S E S S IO N O F C O N G R E S S
O N A P R O G R A M F O R E C O N O M IC R E C O V E R Y
February 18,1981
The U.S. Capitol
9:00 P.M. EST
THE PRESIDENT: Thank you very much. Thank you all very much. Mr. Speaker, Mr.
President, distinguished Members of Congress, honored guests, and fellow citizens: Only a month ago,
I was your guest in this historic building and I pledged to you my cooperation in doing what is right
for this nation that we all love so much.
I am here tonight to reaffirm that pledge and to ask that we share in restoring the promise that
is offered to every citizen by this, the last, best hope of man on earth.
All of us are aware of the punishing inflation which has for the first time in 60 years held to
double digit figures for two years in a row. Interest rates have reached absurd levels of more than 20
percent and over IS percent for those who would borrow to buy a home. All across this land one can
see newly-built homes standing vacant, unsold because of mortgage interest rates.
Almost eight million Americans are out of work. These are people who want to be productive.
But as the months go by despair dominates their lives. The threats of layoff and unemployment hang
over other millions and all who work are frustrated by their inability to keep up with inflation.
One worker in a Midwest city put it to me this way: He said, "I’m bringing home more dollars
than I believed I could possibly earn but I seem to be getting worse off." And he is. Not only have
hourly earnings of the American worker, after adjusting for inflation, declined five percent over the
past five years, but in these five years federal personal taxes for the average family have increased 67
percent.
We can no longer procrastinate and hope that things will get better. They will not. Unless we
act forcefully and now the economy will get worse.
Can we who man the ship of state deny it is somewhat out of control? Our national debt is
approaching one trillion dollars.
A few weeks ago I called such a figure, a trillion dollars,
incomprehensible. And I’ve been trying ever since to think of a way to illustrate how big a trillion
really is. And the best I could come up with is that if you had a stack of thousand-dollar bills in your
hand only four inches high, you’d be a millionaire.
A trillion dollars would be a stack of
thousand-dollar bills 67 miles high.




1

The interest on the public debt this year we know will be over S90 billion, and unless we change
the proposed spending for the fiscal year beginning October 1st, we'll add another almost S80 billion to
the debt.
Adding to our troubles is a mass of regulations imposed on the shopkeeper, the farmer, the
craftsman, professionals and major industry that is estimated to add $100 billion to the price of things
we buy and it reduces our ability to produce.
The rate of increase in American productivity, once one of the highest in the world, is among the
lowest of all major industrial nations. Indeed, it has actually declined in the last three years. Now,
I've painted a pretty grim picture, but I think I’ve painted it accurately. It is within our power to
change this picture and we can act with hope. There’s nothing wrong with our internal strengths.
There has been no breakdown of the human, technological, and natural resources upon which the
economy is built.
Based on this confidence in a system which has never failed us, but which we have failed through
a lack of confidence and sometimes through a belief that we could fine tune the economy and get it
tuned to our liking, I am proposing a comprehensive four-point program. Now, let me outline in detail
some of the principal parts of this program. You’ll each be provided with completely detailed copy of
the entire program. This plan is aimed at reducing the growth in government spending and taxing,
reforming and eliminating regulations which are unnecessary and unproductive or counter-productive,
and encouraging a consistent monetary policy aimed at maintaining the value of the currency.
If enacted in full, this program can help America create 13 million new jobs, nearly three million
more than we would have without these measures. It will also help us to gain control of inflation. It’s
important to note that we’re only reducing the risk of increase in taxing and spending. We’re not
attempting to cut either spending or taxing levels below that which we presently have.
This plan will get our economy moving again, (create) productivity growth, and thus create the
jobs that our people must have. And I’m asking that you join me in reducing direct Federal spending
by 41.4 billion dollars in fiscal year 1982 along with another 7. — (Applause) — and this goes along
with another 7.7 billion in user fees and off budget savings for a total of $49.1 billion. And this will
still allow an increase of $40.8 billion over 1981 spending.
Now, I know that exaggerated and inaccurate stories about these cuts have disturbed many
people, particularly those dependent on grant and benefit programs for their basic needs. Some of you
have heard from constituents, I know, afraid that Social Security checks, for example, were going to be
taken from them. Well, I regret, the fear that these unfounded stories have caused and I welcome this
opportunity to set things straight.
We will continue to fulfill the obligations that spring from our national conscience. Those, who
through no fault of their own, must depend on the rest of us, the poverty stricken, the disabled, the
elderly, all those with true need, can rest assured that the social safety of programs they depend on are
exempt from any cuts.




2

The full retirement benefits of the more than 31 million Social Security recipients will be
continued along with an annual cost of living increase. Medicare will not be cut, nor will supplemental
income for the blind, the aged and the disabled. And funding will continue for veterans' pensions.
School breakfasts and lunches for the children of low income families will continue as will
nutrition and other special services for the aging. There will be no cut in Project Head Start or
summer youth jobs.
All in all, nearly S216 billion providing help for tens of millions of Americans — will be fully
funded. But government will not continue to subsidize individuals or particular business interests where
real need cannot be demonstrated. (Applause.) And while we will reduce some subsidies to regional
and local governments, we will at the same time convert a number of categorical grant programs into
block grants to reduce wasteful administrative overhead and to give local governments and states more
flexibility and control. We call for an end to duplication to federal programs and reform of those
which are not cost effective.
Now, already, some have protested that there must be no reduction in aid to schools. Well, let
me point out that Federal aid to education amounts to only eight percent of the total educational
funding. And for this eight percent, the Federal Government has insisted on tremendously
disproportionate share of control over our schools. Whatever reductions we’ve proposed in that eight
percent will amount to very little in the total cost of education. They will, however, restore more
authority to States and local school districts. (Applause.)
Historically, the American people have supported by voluntary contributions more artistic and
cultural activities than all the other countries in the world put together. I wholeheartedly support this
approach and believe that Americans will continue their generosity. Therefore, I’m proposing a savings
of $85 million in the Federal subsidies now going to the arts and humanities.
There are a number of subsidies to business and industry I believe are unnecessary. Not because
the activities being subsidized aren’t of value but because the marketplace contains incentives enough
to warrant continuing these activites without a government subsidy. One such subsidy is the
Department of Energy’s synthetic fuels program. We will continue support of research leading to
development of new technologies and more independence from foreign oil, but we can save at least S3.2
billion by leaving to private industry the building of plants to make liquid or gas fuels from coal.
We’re asking that another major industry, business subsidy I should say, the Export-Import Bank
loan authority, be reduced by one-third in 1982. We’re doing this because the primary beneficiaries of
taxpayer funds in this case are the exporting companies themselves — most of them profitable
corporations.

This brings me to a number of other lending programs in which government makes low-interest
loans, some of them at an interest rate as low as two percent. What has not been very well understood
is that the Treasury Department has no money of its own to lend. It has to go into the deep, the
private capital market and borrow the money. So, in this time of excessive interest rates the
government finds itself borrowing at an interest rate several times as high as the interest it gets back




3

from those it lends the money to. And this difference, of course, is paid by your constituents — the
taxpayers. They get it again if they try to borrow because government borrowing contributes to raising
all interest rates.
We can save hundreds of millions of dollars in 1982 and billions more over the next few years.
There’s a lack of consistent and convincing evidence that EDA and its Regional Commissions have
been effective in creating new jobs. They have been effective in creating an array of planners,
grantsmen and professional middlemen. We believe we can do better just by the expansion of the
economy and the job creation which will come from our economic program. (Applause.)
The Food Stamp program will be restored to its original purpose, to assist those without
resources to purchase sufficient nutritional food. We will, however, save $1.8 billion in FY 1982 by
removing from eligibility those who are not in real need or who are abusing the program. (Applause.)
Even with this reduction, the program will be budgeted for more than $10 billion.
We will tighten welfare and give more attention to outside sources of income when determining
the amount of welfare that an individual is allowed. This plus strong and effective work requirements
will save $520 million in the next year.
I stated a moment ago our intention to keep the school breakfast and lunch programs for those
in true need. But by cutting back on meals for children of families who can afford to pay, the savings
will be $1.6 billion in FY 1982.
Now, let me just touch on a few other areas which are typical of the kind of reductions we’ve
included in this economic package. The Trade Adjustment Assistance program provides benefits for
workers who are unemployed when foreign imports reduce the market for various American products
causing shutdown of plants and layoff of workers. The purpose is to help these workers find jobs in
growing sectors of our economy. There’s nothing wrong with that, but because these benefits are paid
out on top of normal unemployment benefits, we wind up paying greater benefits to those who lose
their jobs because of foreign competition than we do to their friends and neighbors who are laid off due
to domestic competition. Anyone must agree that this is unfair. Putting these two programs on the
same footing will save $15 billion in just one year.
Earlier I made mention of changing categorical grants to States and local governments into
block grants. Now, we know of course that categorical grant programs burden local and state
governments with a mass of Federal regulations and federal paperwork.
Ineffective targeting, wasteful administrative overhead — all can be eliminated by shifting the
resources and decision-making authority to local and state government. This will also consolidate
programs which are scattered throughout the federal bureaucracy, bringing government closer to the
people and saving $23.9 billion over the next five years.
Our program for economic renewal deals with a number of programs which at present are not
cost-effective. An example is Medicaid. Right now Washington provides the states with unlimited




4

matching payments for their expenditures. At the same time we here in Washington pretty much
dictate how the states are going to manage those programs. We want to put a cap on how much the
federal government will contribute, but at the same time allow the states much more flexibility in
managing and structuring their programs.
I know from our experience in California that such flexibility could have led to far more cost
effective reforms.
Now, this will bring a savings of SI billion next year.
The space program has been and is important to America and we plan to continue it. We
believe, however, that a reordering of priorities to focus on the most important and cost effective
NASA programs can result in a savings of a quarter of a million dollars.
Coming down from space to the mailbox, the Postal Service has been consistently unable to live
within its operating budget. It is still dependent on large federal subsidies. We propose reducing those
subsidies by $632 million in 1982 to press the Postal Service into becoming more effective, and in
subsequent years the savings will continue to add up.
The Economic Regulatory Administration in the Department of Energy has programs to force
companies to convert to specific fuels. It has the authority to administer a gas rationing plan and
prior to decontrol it ran the oil price control program. With these and other regulations gone we can
save several hundreds of millions of dollars over the next few years.
I’m sure, there’s one department you’ve been waiting for me to mention, the Department of
Defense. It’s the only department in our entire program that will actually be increased over the
present budgeted figure. (Applause.) But even here there was no exemption. The Department of
Defense came up with a number of cuts which reduced the budget increase needed to restore our
military balance. These measures will save $2.9 billion in 1982 outlays and by 1986 a total of S28.2
billion will have been saved. Or perhaps I should say will have been made available for the necessary
things that we must do. The aim will be to provide the most effective defense for the lowest possible
cost.
I believe that my duty as President requires that I recommend increases in defense spending over
the coming years. (Applause.)
I know that you’re all aware, but I think it bears saying again: that since 1970 the Soviet
Union has invested $300 billion more in its military forces than we have. As a result of its massive
military buildup, the Soviets now have made a significant numerical advantage in strategic nuclear
delivery systems, tactical aircraft, submarines, artillery and anti-aircraft defense. To allow this
imbalance to continue is a threat to our national security.

Notwithstanding our economic straits, making the financial changes beginning now is far less
costly than waiting and having to attempt a crash program several years from now.




5

We remain committed to the goal of arms limitation through negotiation. I hope we can
persuade our adversaries to come to realistic balanced ajid verifiable agreements. (Applause.) But, as
we negotiate, our security must be fully protected by a balanced and realistic defense program.
Now, let me say a word here about the general problem of waste and fraud in the federal
government. One government estimate indicated that fraud alone may account for anywhere from one
to ten percent — as much as $25 billion of federal expenditures for social programs. If the tax dollars
that are wasted or mismanaged are added to this fraud total, the staggering dimensions of this problem
begin to emerge.
The Office of Management and Budget is now putting together an interagency task force to
attack waste and fraud.
We’re also planning to appoint as Inspectors General highly-trained
professionals who will spare no effort to do this job.
No administration can promise to immediately stop a trend that has grown in recent years as
quickly as government expenditures themselves. But let me say this: waste and fraud in the federal
government is exactly what I have called it before — an unrelenting national scandal — a scandal
we're bound and determined to do something about. (Applause)
Marching in lockstep with the whole program of reductions in spending is the equally important
program of reduced tax rates. Both are essential if we’re to have economic recovery. It’s time to
create new jobs, to build and rebuild industry, and give the American people room to do what they do
best. And that can only be done with a tax program which provides incentive to increase productivity
for both workers and industry.
Our proposal is for a 10-percent across-the-board cut every year for three years in the tax rates
for all individual income taxpayers making a total cut in tax cut rates of 30 percent. This three-year
reduction will also apply to the tax on unearned income leading toward an eventual elimination of the
present differential between the tax on earned and unearned income.
Now, I would have hoped that we could be retroactive with this. But as it stands, the effective
starting date for these 10 percent personal income tax rate reductions will call for as of July 1st of this
year.
Again, let me remind you that while this 30 percent reduction will leave the taxpayers with $500
billion more in their pockets over the next five years, it’s actually only a reduction in the tax increase
already built into the system.
Unlike some past tax "reforms,” this is not merely a shift of wealth between different sets of
taxpayers. This proposal for an equal reduction in everyone’s tax rates will expand our national
prosperity, enlarge national incomes, and increase opportunities for all Americans.
Some will argue, I know, that reducing tax rates now will be inflationary. A solid body of
economic experts does not agree. And tax cuts adopted over the past 3/4 of a century indicate these
economic experts are right. They will not be inflationary.



6

I’ve had advise that in 1985 our real production in goods and services will grow by 20 percent
and be S300 billion higher than it is today. The average worker’s wage will rise in real purchasing
power 8 percent and this is in after-tax dollars. And this, of course, is predicated on a complete tax
cuts and spending reductions being implemented. The other part of the tax package is aimed directly
at providing business and industry with the capital to modernize and engage in more research and
development.
This will involve an increase in depreciation allowances and this part of our tax proposal will be
retroactive to January 1st. The present depreciation system is obsolete, needlessly complex, and
economically counterproductive. Very simply, it bases the depreciation of plant machinery and vehicles
and tools on their original cost, with no recognition of how inflation has increased their replacement
cost.
We’re proposing a much shorter write-off time than is presently allowed — a five-year
write-off for machinery, 3 years for vehicles and trucks, and 10-year write-off for plant. In Fiscal
Year 1982 under this plan, business would acquire nearly $10 billion for investment. By 1985 the figure
would be nearly $45 billion.
These changes are essential to provide the new investment which is needed to create millions of
new jobs in 1985, and to make America competitive once again in the world market. (Applause.)
These won’t be make-work jobs. They are productive jobs, jobs with a future. I’m well aware that
there are many other desirable and needed tax changes, such as indexing the income tax brackets to
protect taxpayers against inflation, the unjust discrimination against married couples if both are
working and earning, tuition tax credits, the unfairness of the inheritance tax, especially to the
family-owned farm and the family-owned business, and a number of others.
But our program for economic recovery is so urgently needed to begin to bring down inflation
that I’m asking you to act on this plan first and with great urgency. And then, I pledge that I will join
with you in seeking these additional tax changes at an the earliest date possible. (Applause.)
American society experienced a virtual explosion in government regulation during the past
decade. Between 1970 and 1979, expenditures for the major regulatory agencies quadrupled. The
number of pages published annually in the Federal Register nearly tripled, and the number of pages in
the Code of Federal Regulations increased by nearly two-thirds.
The result has been higher prices, higher unemployment, and lower productivity growth.
Overregulation causes small and independent businessmen and women, as well as large businesses, to
defer or terminate plans for expansion. And, since they are responsible for most of the new jobs, those
new jobs just aren’t created.
We have no intention of dismantling the regulatory agencies, especially those necessary to
protect the environment and insure the public health and safety. However, we must come to grips with
inefficient and burdensome regulations, eliminate those we can and reform the others.




7

I have asked Vice President Bush to head a Cabinet-level task force on regulatory relief.
Second, I asked each member of my Cabinet to postpone the effective dates of the hundreds of new
regulations which have not yet been implemented. Third, in coordination with the task force, many of
the agency heads have already taken prompt action to review and rescind existing burdensome
regulations.
And finally, just yesterday, I signed an Executive Order that for the first time provides for
effective and coordinated management of the regulatory process.
Much has been accomplished but it's only a beginning. We will eliminate those regulations that
are unproductive and unnecessary by Executive Order where possible and cooperate fully with you on
those that require legislation.
The final aspect of our plan requires a national monetary policy which does not allow money
growth to increase consistently faster than the growth of goods and services. In order to curb inflation
we need to slow the growth in our money supply. Now, we fully recognize the independence of the
Federal Reserve System and will do nothing to interfere with or undermine that independence. We will
consult regularly with the Federal Reserve Board on all aspects of our economic program and will
vigorously pursue budget policies that will make their job easier in reducing monetary growth.
A successful program to achieve stable and moderate growth patterns in the money supply will
keep both inflation and interest rates down and restore vigor to our financial institutions and markets.
This, then, is our proposal, America’s new beginning, a program for economic recovery.
I don’t want it to be simply the plan of my administration. I’m here tonight to ask you to join
me in making it our plan. Together we can embark on this road. (Applause.)
I should have arranged to quit right there. (Laughter. Applause.) Well, together we can embark
on this road not to make things easy but to make things better.
Our social, political and cultural, as well as our economic institutions, can no longer absorb the
repeated shocks that have been dealt them over the past decades. Can we do the job? The answer is
yes. But we must begin now.
We’re in control here. There’s nothing wrong with America that together we can’t fix. I’m sure
there’ll be some who will raise the familiar old cry, "Don’t touch my program; cut somewhere else." I
hope I’ve made it plain that our approach has been even-handed, that only the programs for the truly
deserving needy remain untouched. The question is are we simply going to go down the same path
we’ve gone down before, carving out one special program here, and another special program there. I
don’t think that’s what the American people expect of us. More important, I don’t think that’s what
they want. They are ready to return to the source of our strength.
The substance and prosperity of our nation is built by wages brought home from the factories
and the mills, the farms, and the shops. They are the services provided in 10,000 comers of America;




8

the interest on the thrift of our people and the returns for their risk-taking.
America is the possession of those who build, serve, create and produce.

The production of

For too long now, we've removed from our people the decisions on how to dispose of what they
created. We've strayed from first principles. We must alter our course.
The taxing power of government must be used to provide revenues for legitimate government
purposes. It must not be used to regulate the economy or bring about social change. (Applause.)
We've tried that and surely we must be able to see it doesn’t work.
Spending by government must be limited to those functions which are the proper province of
government. We can no longer afford things simply because we think of them.
Next year vve can reduce the budget by S41.4 billion, without harm to government's legitimate
purposes or to our responsibility to all who need our benevolence. This, plus the reduction in tax
rates, will help bring an end to inflation.
In the health and social services area alone the plan we’re proposing will substantially reduce the
need for 465 pages of law, 1400 pages of regulations 5000 federal employees who presently administer
7,600 separate grants in about 25.000 separate locations. (Applause.) Over seven million men and
women hours of work by state and local officials are required to fill out government forms.
I would direct a question to those who have indicated already an unwillingness to accept such a
plan: have they an alternative which offers a greater chance of balancing the budget, reducing and
elim inating inflation, stimulating the creation o f jobs, and reducing the tax burden? And, if they
haven’t, are they suggesting we can continue on the present course without coming to a day of
reckoning? (Applause.)
If we don’t do this, inflation and a growing tax burden will put an end to everything we believe in
and our dreams for the future. We don’t have an option of living with inflation and its attendant
tragedy, millions of productive people willing and able to work but unable to find a buyer for their work
in the job market.
W'e have an alternative and that is the program for economic recovery. True, it’ll take time for
the favorable effects of our proposal to be felt. So we must begin now.
The people are watching and waiting. They don’t demand miracles. They do expect us to act.
Let us act together.
Thank you and good night.




9:30 E.S.T.

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I V . R e m a r k s o f th e P r e s id e n t a t B r e a k fa s t w it h E d it o r s




TH W
E HITE H U
O SE
O ffic e o f the Press Secretary

R ARK OF TH PRESIDENT
EM S
E
AT BREAKFAST W
ITH EDITORS
February 19, 1981
9:02 A.M. EST
TH PRESIDENT: Those o f you who haven't fin ish ed break­
E
fa s t , keep on eating and I w ill talk over you. Welcome here. Delighted
to have you a l l here th is morning. Maybe some o f you have n oticed that
the h e lico p te r is on the lawn in case m reception is somewhat d iffe r e n t
y
than i t has been. W are departing soon to make sure that the West Coast
e
is s t i l l attached. Again, as I say, we are pleased to have you here.
W think that we can have a dialogue instead o f a monologue, and I am
e
going to , without any further remarks, introduce to you one o f our Cabinet
se cre ta rie s who w ill introduce a couple o f teammates and then I w ill come
back and we w ill begin some questions and answers that w ill be concluded
with the gentleman that you are about to meet. Ladies and gentlemen, the
Secretary o f the Treasury, Don Regan.
(Applause.)
SECRETARY REGAN: Thank you, Mr. President. Good morning
la d ies and gentlemen. I t is a pleasure to be here with you. I hope that
you are a l l as t h r ille d as I was la st night in hearing the P residen t's
remarks. This program is r e a lly b old . I t is innovative. I t is new.
I t breaks with the past. And i t is d iffe r e n t . I think that i t is going
to be one o f the most stim ulating things that has ever happened to our
economy. From the point o f view o f why we are being so abruot in break­
ing with the p a s t ,it is that we can no longer go on with what we have
been- doing.
You take a look at what our economy has been doing and con­
s id e r that fo r the la s t two years we have had the greatest rates o f in ­
fla t io n since the C iv il War, and we apparently were going to continue
down that road unless there was a break, so we have decided to make i t .
W are doing it#as you know, as the President explained i t la st night,
e
with a fou r-p a rt program.
The f i r s t part o f that program is the spending cu ts. The
second part o f the program are the tax cu ts. The third part o f the program
is deregulation — g ettin g the government o f f the back o f the people.
And the fourth part o f i t con sists o f having a stable monetary growth.
Now during the morning, Dave Stockman, Murray Weidenbaum,
and I w ill be explaining the d e ta ils o f th is package. I w ill not take
any longer except to say that as part o f m program, that i s , the tax
y
part o f i t , I am going up on the H ill th is morning at 10:00 to s ta rt
explaining i t .
I have another session with a d iffe r e n t part o f the H ill
at 2:00. I am back up there again tomorrow at 10:00. W w ill be ex­
e
p la in in g th is program, I hope :not ad nauseum,but at lea st with a great
deal o f c la r it y so that y o u 'l l a l l understand i t . And we fe e l that
i t ' s ex a ctly what the American people have wanted. I t 's been designed
that way. We're going to give i t to them that way. We're going to
fig h t with them in Congress.
You can use any analogy you want. This is the k ic k -o ff
in fo o t b a ll. This is the f i r s t inning o f a baseball game. We're righ t
at the s ta rt o f what promises to be a great v icto ry fo r the Reagan
fo r c e s . And t h a t's the program that w e're going to be developing over
the next few months working with the Congress. Thank you very much.




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Now, I 'd lik e to introduce m colleague and sidekick
y
fo r these past s ix weeks, a man th a t's well-known to most o f you,
David Stockman, D irector o f the O ffic e o f Management and Budget.
Dave. (Applause.)
M STOCKM
R.
AN: Well, thank you very much, Don, and ladies
and gentlemen I would lik e to welcome you to the P residen t's new White
House Breakfast Program th is morning, the one new program that we d id n 't
announce la st night.
But what we hope that w e're o ffe r in g to you th is morning
is not only a breakfast but some food fo r thought. And what I would
lik e to suggest today is the plan that the President announced la st
night contains more new ideas, more new approaches to the fundamental
economic problems o f th is country than we’ ve seen in the la st 15 or
20 years in Washington.
And when you look at the economic mess that we have today,
the way that in fla t io n is eroding the a b ilit y o f our economy to operate,
the way in which tax rates continue to creep up and destroy in cen tives,
destroy investments, destroy savings, i t ' s pretty clea r to m and I think
e
i t ' s pretty cle a r to the President that the kind o f bold changes on the
spending sid e , on the tax sid e, on the regulatory side that he proposed
la s t night are p re c is e ly what this country needs.
I'm in charge o f the budget side in p a rticu la r. And although
the papers th is morning, at lea st some o f them, have suggested that
th is $41 b i ll i o n cut that w e're requesting in the federal budget is
too draconian, is too deep, I would ju st take this opportunity to remind
you that even a fte r a l l those changes are made, and even a fte r the Congress
adopts the 83 d iffe r e n t proposals that we presented la st night, we w ill
s t i l l have a budget next year that is $40 b i ll i o n higher than i t is this
year.
The b asic problem fo r two or three years now has been
simply that the federal budget has been growing at an astronom ically
unsustainable ra te . I t 's increased at 16 percent a year since f i s c a l
year '79 . That's fa r fa s te r than the growth o f our tax base. I t 's
fa r fa s te r than the growth o f our economy as a whole. As a re s u lt,
w e're taking a la rger and larger share o f the output o f our economy
at the government le v e l. And that explains b a s ica lly the economic
d ete rio ra tio n that we've had.
So w e're proposing to s h ift d ire ctio n sharply, to hold
the growth rate o f fed eral spending to 6 percent next year and in the
years th e re a fter.
I t w ill be d i f f i c u l t to do. But we have proposed to
slay some sacred cows, i f you w i ll . W have proposed to reduce or
e
elim inate programs that simply c a n 't be ju s t ifie d under the current
f i s c a l and economic c r i s i s con dition s that we face in th is country.
But I think that we*re going to get a favorable response
from the American people and I think w e're going to get a favorable
response from the H ill. I happened to spend four years on the H ill
as a member o f Congress. And I know that during those four years, every
member o f Congress knew in his mind and his heart that things were going
too fa r, that things were out o f hand. Now we have a President who's
w illin g to propose a program to turn that around. W have a President
e
who I think can r a lly the support o f th is country. And I think you 're
going to fin d on Capitol H ill, despite a ll the cynicism that you hear from
some, that w e're going to get a great deal o f support and that w e're going
to get th is job done. Thank you.
(Applause.)




Oh, excuse me.

I t 's my pleasure now to introduce the
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th ird member o f our economic team, Murray Weidenbaum, who's Chairman
o f the Council of Economic Advisers. He's the guy in charge of
in tegratin g and p u llin g th is whole program together and explaining i t
in a lu cid and convincing way, something that h e's fu lly capable o f
doing. So, I would lik e to introduce Murray Weidenbaum, Chairman o f
the CEA. (Applause.)
M WEIDENBAUM:. Ladies and gentlemen, I would lik e to
R.
emphasize ju st one key p oin t. The Reagan program is a program for
a h ea lth ier economy which w ill provide real s o lid b en efits to every
American c it iz e n . 1 w ill not concentrate on the medicine, so to speak,
the budget cuts, the regulatory r e s tr a in t. I would lik e to emphasize
the re s u lts , the p o s itiv e re s u lts , in terms o f bringing the in fla t io n
down by more than h a lf, in terms o f reducing the tax burden o f every
taxpayer, the creation o f three m illion new jobs , a l l th is between
now and 19 86 — not a quick f i x to be sure, but a con stru ctive, balanced
program which very frankly deserves the support, I think, o f the
American people.
And, p erson ally, i t ' s a real pleasure to work fo r the
number one economic communicator o f our nation, the President o f the
United States.
TH PRESIDENT: Well, ladies and gentlemen, you obviously
E
know that you are here because we b eliev e that the main source o f
strength in this fig h t is going to be the people themselves. And we
b e lie v e a lso that they are ready to support a great change and go
along.
And you are in a p o sitio n to help with t h is . I 'v e been
hearing some o f the voices already and, when I was gettin g dressed,
some o f the morning shows, from those who would be expected to be
against th is program in government. And I almost sensed that 6ne o f
th e ir plans is going to be to not c r i t i c i z e the cuts at a l l but to
see i f they ca n 't wipe out the tax part o f the program.
This tax part o f the program we have trie d to stress,an d
th is is one o f the reasons why we've gone out o f our way to point out
to the people that i t is not a reducing o f the amount o f money that
government is going to g et, i t is reducing the increase.
W found in C a liforn ia when I was governor there that —
e
and we had our great w elfare reforms and a l l and we had in h erited a
situ a tio n sim ilar to that o f the federal government today. And during
the campaign I was very fru stra ted when people would ring up and say,
"Well, yes, he talks about saving money in C a liforn ia ,b u t look, the
budgets went up and then went up to such and such a figu re by the time
he l e f t o f f i c e . " What they d id n 't re a liz e was o f course the budgets
are going to go up.
There's growth, th e re 's in fla t io n , th e re 's growth
in government to match the increase in population and so fo r th .
What they d id n 't r e a liz e though was that that slan t o f going up, we
reduced by 20 percent. And i f you do the same with the taxes and
change the steep r is e , today th e re 's v ir tu a lly $100 b ill i o n o f tax
increase b u ilt in to the present system that w ill take place in th is
coming year i f we do not reduce that in crease.
But fo r years now the two lin e s have been diverging.
Even steep as the taxes are, they d o n 't keep up with the increase in
spending. I f we can bring those lin es to be more p a r a lle l and what we
are — b e lie v e me, hoping fo r , and know we can do, is have the tax
lin e begin to converge with the spending lin e . And when you reach that
poin t and then i f you keep going the tax lin e w ill be bringing in revenues
greater than the increase in government. That, is when you go forward
with further tax cuts o f the kind to co r re ct the in eq u ities that I
mentioned in m remarks la s t n igh t.
y




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And I b e lie v e the people are ready. But I b e lie v e
that t h e r e 's going to be a l o t o f m isinform ation relea sed in the
fig h t s th a t might go on. And y e t , w e're o p t im is t ic . W think that
e
a cross the a i s l e , in Congress today, there is a d iffe r e n t fe e lin g and
th ere are more people than anyone r e a liz e s who are o f the opin ion that
th is has to go forward.
Now, rath er than go on with any kind o f a monologue, and
s in ce my time is lim ite d h ere, and p o s s ib ly yours a ls o , maybe we can
open th is up to d is cu s s io n or q u estion s from you. And i f you throw
me one that I c a n 't answer
you can see I 'v e got three s p e c i a l i s t s
here th at I ' l l c a l l on.
Q
Mr. P resid en t, in your l i s t o f in fla t io n a r y fo r ce s
l a s t n ig h t, why d id you not mention the in crea se o f g a so lin e p r ic e s
and home heating fu e ls ?
TH PRESIDENT: W in the l i s t o f in fla t io n a r y fo r c e s
E
hy
d id I not mention g a so lin e p r ic e s and home h eatin g fu e l p r ic e s .
W ell, I have to b e lie v e that to a c e r ta in e x te n t, I know that t h a t 's
an unusual s it u a t io n , p r ic e s are not so much the cause o f in f l a t io n —
p r ic e r i s e s , t h e y 'r e the r e s u lt . And when I say there is something
d i f f e r e n t in that one, y e s.
When the OPEC nations with the near monopoly power now
take advantage o f that p o s itio n and ju s t simply r a is e the p r ic e
t o s u it them selves. That i s a p r ic e over and above the normal
response to i n f l a t i o n .
Although, I 'v e — as one econom ist p oin ted out a couple
o f years ago, he d id n 't s ta te th is as a th eory , but he ju s t s a id i t ' s
something to look a t, when we s ta rte d buying the o i l over there and
the OPEC n a tio n s, 10 b a r re ls o f o i l were s o ld fo r the p r ic e o f an
ounce o f g o ld . And the p r ic e was pegged to the American d o lla r .
And
we were about the only country l e f t that s t i l l were on a gold standard.
And then a few years went by and we l e f t the g old standard. And as
t h is man su ggested, i f you look at the re cu rre n t p r ic e r i s e s , were
the OPEC n ations r a is in g the p r ic e o f o i l o r were they simply fo llo w in g
the same pa ttern o f an ounce o f g o ld ? That as gold in th is in fla t io n a r y
age kept goin g up, they w e re n 't goin g to fo llo w our paper money down­
h ill.
They stayed with the gold p r i c e .




MR
OE

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5 -

Of course, now, i f we follow ed that, why they should be
coming down because the p rice o f o i l is coming down. But I think
that th a t's lik e the in fla tio n contributing fa cto r which w ill happen some­
times simply because o f a poor crop. That is not based on the economy,
t h a t 's simply supply and demand and th e re 's a crop fa ilu re and you've
got a bigger demand than you have supply — the p rice goes up.
But I b eliev e that even those things can be d ealt with
with the other fa ctors that w e're going to fo llo w tand that is trying
to increase the energy supply in our own country. I think we can
ta lk conservation a l l we want, but th e re 's a lim it,w hat you get
below,what you cannot get maintaining your le v e l o f comfort and your
le v e l o f industry. And I think the best answer while conservation,
is w illin g i t s e l f is to try to make us independent o f outside
sources to the greatest extent p o ssib le for our energy and I b elieve
that we have the p o s s ib il it i e s o f that. We're not energy poor. There's
energy yet to be found and developed in th is country including the
b igg est co a l p ile
any country in the world s it s on.
So, i f I d id n 't mention th a t, i t was because I d id n 't
mention a number o f other th in gs.
I
wanted to get through in 30 minutes before m audience walked out on
y
me.
(Laughter)
Q

(Inaudible.)

TH PRESIDENT: W ell, in s o c ia l services — maybe part o f
E
my confidence in that and what we can do i s based on what we did in
C a lifo rn ia . W fin a lly re a lize d that a l l the savings we were making,
e
a l l the economies, were a l l being eaten by w elfare. And in good times
and bad i t bore no re la tio n to the economy. W saw that w elfare in
e
C a lifo rn ia was reaching a point o f an increase as much as 40,000 cases
a month being added to the w elfare r o le s . W fin a lly turned the task
e
fo r c e lo o se to come back with a plan fo r reforming w elfare. And we
had a long fig h t . W could do the part adm inistratively or two fig h ts .
e
W had a fig h t with our le g is la tu r e to get some o f i t , because I had
e
a h o s t ile le g is la tu r e at the time, and we had a fig h t with Washinaton—
with the bureaucracy o f H W who had ru les and regu lation s. For example,
E
and th is is s t i l l true today, that under those rules and regulations
no one in the United States knows how many people are on w elfare. They
only know how many checks th e y 're sending out and then we turn up a
woman in Chicago th a t's g ettin g checks under 127 d iffe r e n t names. And
ju s t recen tly in Pasadena, C a lifo rn ia ,liv in g in a lov ely big home there,
a woman was brought in and charged with c o lle c t in g $300,000 in a w elfare
scheme.
W ell, we se t out to co r r e c t t h is . W fin a lly got some
e
waivers from H . W fin a lly got the le g is la t io n and again, we got i t
EW e
— one o f the biggest sin g le things that happened to turn the public
on our side in that fig h t came from your p rofession — from the press.
When a paper from San Francisco sent a reporter out to see i f he could
get on w elfare — to see i f our s t o r ie s o f the horrors o f w elfare were
tru e. He got on w elfare four times under four d iffe r e n t names in the
same o f f i c e on the same day. And when he wrote that sto ry , we had an
a l ly . When we fin ish ed our reform s, though— we hadn't been able to
give a co s t o f liv in g increase to the w elfare re cip ie n ts in C a liforn ia
because we were spread so thin , th is is 1958 — we saved over a three
year p eriod , because the w elfare reform went in only in my la s t three
years — we saved $2 b i ll i o n fo r the C a liforn ia taxpayers in the program.
The t o le s were reduced by more than 350,000 people without us a ctu a lly
throwing anyone o f f . They ju s t disappeared, and over and above that
we had enough to increase the w elfare grants fo r the deserving needy
who remained by an average o f 43 percent.




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And when I say we d id n 't throw anyone o f f , we g ot oerm ission
that in 35 o f our 58 co u n tie s , we cou ld req u ire a b le-b od ied w elfa re
r e c ip ie n ts to work — to come and re p o r t fo r u sefu l community p r o je c t s —
a l l o f which w e've screened — from sch ool board, from co u n tie s, from
c i t i e s and towns to make sure there were no boondoggles. And they
had to re p o rt - - they only had to work 20, not 40 hours a week. The
o th e r h a lf was to be spent e it h e r in jo b tra in in g o r look in g fo r work
and then we assigned what we c a lle d "jo b agents" from our Labor
Department to each group o f these p e o p le . And t o ld these jo b agents
t h e ir jo b was to look at these p eole doing these job s and see how q u ick ly
they cou ld get them out in the p riv a te e n te r p r is e . And in the midst
o f the *73 and *74 r e c e s s io n , when unemployment was in crea sin g in the
n a tion . They funneled 76,000 w elfa re r e c ip ie n ts through th is program
in to p riv a te e n te rp r is e jo b s — and fr e e o f w elfa re from then on ou t.
And we b e lie v e that th is is w hat's going to happen because w e're very
much determined to turn as much o f w elfa re management as we can back
to the s ta te s — g ive them the fe d e r a l revenue sh are,bu t more in the
nature o f a b lock grant.
And g ive them the r ig h t to req u ire able*
bodied r e c ip ie n ts to work and give them the r ig h t to adm inister th is
program w ithout t h is la yer o f bureaucracy in Washington on top o f i t .
And so , we think w e 're going to b e n e fit
hurt the p eop le that are g e ttin g these gra n ts.

rath er than

Q
Mr. P resid en t, i s there any way you can get the Congress to
vote t h is e n t ir e program up or down o r are you going to have to go
program -by-program -by program u n t il you g et the vote o f each one?
THE PRESIDENT; We'.re in trod u cin g f i v e p ie c e s o f l e g i s l a t i o n .
One w i l l be the tax b i l l , the oth er one w i ll be a r e c o n c i l i a t i o n a ct
—
th at w i l l be one o f the toughest ones. That is to
t r y and g e t them to sim ply submit the program to the major committees
and n ot break i t a l l up in to fragments and fragment i t out w ith a l l the
Then there w i l l be the r e s c is s io n s fo r 1981. W d i d n 't
e
mention that la s t n ig h t, but our cu ts have begun w ith the remainder
o f 1981, which has been goin g on sin ce October 1 st — t h is budget.
W e're going to make se v e ra l b i l l i o n s o f savings b e fo re the year is
out in that program. That w i l l take r e s c is s io n s that have to be
passed by Congress and then, o f co u rse , the cu ts in the 1982 budget
which has been subm itted by the previou s a d m in istra tion . And t h a t 's
the one that w e're hoping t o reduce $41.4 b i l l i o n with our c u ts .
So, t h a t 's as much as we cou ld package i t .
We've emphasized
and I 'v e been meeting w ith l e g i s l a t i v e lea d ers from both sid e s o f
the a i s l e .
We're going to con tin u e to do th at urging them both to
e x p e d ite f i r s t , but a ls o to hold i t to g e th e r.
One o f the reasons that we d i d n 't add in any o f the tax
fe a tu re s th a t I mentioned la t e r — as coming l a t e r on — is because
we thought i f we opened that d o o r, then everyone with an idea
would begin to p ick at the program with amendments and
so fo r t h and we hope th at t h e y 'l l ju s t sim ply g e t the b a s ic program
passed.
I b e lie v e , as I sa id e a r l i e r , th at one o f the
th in gs we
must be most o f aware o f w i l l be the attempt — no one w i l l want to
stand up and oppose the cu ts in to d a y 's clim a te , but they w i l l then
sa y, "W ell, the tax p a rt o f i t w on 't w ork ."




M RE
O

-

Q

(In a u d ib le .)

THE PRESIDENT:
Q

No.

(In a u d ib le .)

TH PRESIDENT:
E
Q

7 -

Yes.

What e x a c tly d id you mean by that?

(In a u d ib le .)

THE PRESIDENT: W ell now, t h a t 's a problem I'm going to
have to fa ce and I had a ru le 1 111 f a l l back on in C a lifo r n ia as
Governor. I never ta lk about whether I ' l l sign or v e to u n t il
whatever i s there i s b e fo r e me on my desk. But the two must go
to g e th e r i f we are to have the stim u la te to the economy, because
the main purpose o f th is is r e a lly to g et the economy moving again.
And to do th a t, w e've seen the percentage o f gross n a tion a l product
th a t the Federal Government i s taking in taxes going up c o n s is t e n t ly .
And i f you go back to where i t was hovering below 20 and down around
anywhere from seventeen and a h a lf to nineteen over the y e a rs, we
d i d n 't have i n f l a t i o n . W d i d n 't have the problems w e 're having
e
to d a y /b u t w e 're on our way up to alm ost a fou rth o f the gross n a tion a l
prod u ct taken by government in taxes and t h is i s what we f e e l has
to come down i f the economy i s to go forw ard, and o f co u rse , to do
th a t, w e've g ot to make — i f w e 're going to cure in fla t io n ,w h ic h
I b e lie v e stems in the main from government spending more than i t
takes i n f w e 're goin g to have to b rin g government down to match the
reven u es.
Q
Mr. P re sid e n t, many p eop le in Congress b e lie v e
in the tax c u t s , I mean budget c u ts , but are very concerned about
the tax c u t s . They fe a r i t w i l l be in fla t io n a r y . How do you plan to
combat th a t fe a r among Congress?
THE PRESIDENT: W ell, I mentioned th a t l a s t n ig h t, th is
fe a r th a t the tax cu ts would be in fla t io n a r y .
F ir s t o f a l l , a number
o f fin e econom ists l ik e Murray Weidenbaum and many o f h is a s s o c ia te s
d o n 't think that t h a t 's s o , but a ls o w e've g o t h is to r y on our s id e .
Every major tax cu t th a t has been made in th is century in our country
has re s u lte d in even the government g e tt in g more revenue than i t did
b e fo r e because the base o f the economy i s so broadened by doing i t .
W on ly have to look a t the l a s t few ex p erien ces w ith
e
cu ts in the c a p it a l gains tax and you fin d th a t the very next year
a f t e r the ra te was low ered, the government g o t more revenue from
c a p it a l gains tax than i t ' s been g e t tin g a t the higher r a t e . What
happens? People up th ere who are now w orried about and busying
them selves with tax s h e lt e r s , i f i t becomes p r o f i t a b l e to move out
in t o r is k -t a k in g adventure and investm ents, they then are encouraged
t o move ou t and in to th a t.
Back when C alvin C oolid g e cu t the taxes a cro ss the board,
and more than on ce, the governm ent's revenues in cre a se d . When Jack
Kennedy d id i t in the tw o-year program and h is economic a d v is e r s , they
were a l l t e l l i n g him, I can remember the fig u r e s , they t o ld him that
the government would lo s e $83 b i l l i o n in revenue and the government
gained $54 b i l l i o n in revenue, I think i s the fig u r e , th a t i t a c tu a lly
went up. So they had made q u it e a s iz e a b le fin a n c ia l e r r o r in t h e ir
e s tim a te s . Jack Kennedy's l i n e about i t was, "a r is in g t id e l i f t s a l l
b o a t s . 1 And t h is i s what we b e lie v e th a t the tax p ro p o sa ls th a t w e've
*
made, what t h e y 'r e aimed a t .



Business and industry in America today is investing the
lowest percentage o f any o f the in d u stria l nations in improvement in
plant and equipment. W have the highest percentage o f outmoded
e
in d u stria l plant and equipment o f a ll the in d u stria l nations. One o f the
reasons is the lack o f ca p ita l. The government is
competing in the
private ca p ita l market to fund the government's d e f i c it s . The American
people are saving at a lower percentage than the workers are in Japan,
West Germany and the other in d u stria l nations,and that money that once
went in to savings acounts or insurance, and as we a l l know i t then became
a part o f the ca p ita l pool that was reinvested by banks and insurance
companies out in the free enterprise sector. And you could c i t e a l l
sorts o f figu res o f the increase in investment in tax free
municipal
bonds and the reduction in in d u stria l stocks that have taken place in
America, so a l l o f th is is aimed a t,n ot at being in fla tio n a ry , but the
other way. And w e're ju s t convinced that what has happened before
every time is going to happen again.
Q
Mr. President, the AFL-CIO fe e lin g in Miami is
(inaudible) proposing the program. I wonder i f you would consider
th is thing a curious impediment and i f so, how you would (inaudible)?
TH PRESIDENT: Well, I c a n 't say that I d id n 't expect i t .
E
I thought i t was in terestin g that they kind o f took a stand against i t
before they heard what i t was. Now whether t h e y 'l l be converted or
convinced by the things that they w ill now be able to understand or
know about the program, I wish they would trea t i t with more o f an
open mind. I happen to b eliev e that sometimes th ey're out o f step
with th e ir own rank and f i l e . They certa in ly were in the la st e le c tio n .
But I was the president o f m own union once, an AFL-CIO union, and
y
I think I know something about them. And i t is true that they
p h ilo so p h ica lly have tended for a number of years now to support the
idea o f government spending being good fo r the economy. I remember
once that as a union president representing not only m own but
y
32 other unions in the motion picture industry -and management, I
came to Washington to appear before the House Ways and Means Committee
in support o f a tax reform program that had been introduced. I was
met by two o f the lob b y ists fo r the AFL-CIO and shown a rather sizea b le
book labeled "The Tax P olicy fo r the AFL-CIO” for that year, and i t
was com pletely the opposite o f what I was here to say in behalf o f
those lo c a l unions that were a l l part o f that organization.
They frankly stated that the tax p o licy they favored would
get the government $12 b i l l i o n in a d dition al revenue and they wanted
i t to get that revenue because they had $12 b i ll i o n worth o f w elfare
programs that they wanted the government to adopt.
L isten, I 'v e
been leaning to the rig h t a l l the time — there must be people over
here (laughter) —
Q
Mr. P resident, in cutting back government support
o f syn th etic fu el (inaudible) private en terprise w ill pick up and
do the jo b , fa ilu r e to do so in the past (in a u d ib le ), what makes
you think t h e y 'l l do i t again?
TH PRESIDENT: Well, because i f i t ' s going to be done
E
t h e y 'l l have to do i t . Maybe they haven't done i t in the past because
there was so much promise o f government standing there ready to do i t ,
and you know, not that the giant companies are poor but I keep
remembering what Milton Friedman once said, " I f you s ta rt paying people
to be poor, there is going to be a lo t o f poor p eop le." And maybe
the same thing ‘was true o f business, that human nature is the same
in the board room as i t is down there in the s tr e e t . But I think that
with the p ric e o f fu e l where i t i s , le t me be p r a c tic a l about them
and f a i r to them a lso . There was no in cen tive b efore because what
we were talking about, synthetic fu els were going to be more c o s tly
than the natural fu e ls that we were using. Now with the p ric e up where
i t i s , there is an in cen tive fo r them to look at these because they
may be co s t e ff e c t i v e . They may even be c o s t advantageous over f o s s i l
 .
fu e ls
So I b e lie v e that there i s .


-

9 -

I have always p r e fe rre d th at i f th ere is some stim u late
in a d d itio n th at i s needed, X b e lie v e the tax in c e n tiv e s are a b e t te r
rou te than o u trig h t su bsid y,
Q
Mr. P re sid e n t, I b e lie v e la s t n igh t you sa id th at
spending ou ts are the la r g e s t ever been quoted. Are th ese the
la r g e s t tax cu ts ever been quoted?
THE PRESIDENT: You know something? T h a t's a q u estion —
I ju s t looked over here and I g o t a cu e. Yes. Don Regan t e l l s me they
are and t h a t 's f i t t i n g because the tax in crea se that was adopted in the
l a s t year and that i s b u i lt in to the p resen t system i s the la r g e s t
s in g le tax in cre a s e in our n a t io n 's h is t o r y . So we might as w e ll
match i t w ith the la r g e s t s in g le tax cu t in our h is t o r y .
I know that
I 'v e come to the end o f my time and hear that h e lic o p t e r take o f f
p r e tty q u ic k ly , but d o n 't think your q u estion s w on 't be answered here.
I am now going to g e t my t r i o back up here and they w i l l
take your q u estion s and I think they w i l l be a b le to g iv e you more
indepth on anything th a t you might want to know about the program
th a t w e've been p u ttin g to g e th e r.
So, Don Regan and Murray, Dave Stockman, i t ' s your turn
to come back up here and take the q u estion s from these la d ie s and
gentlem en, and i f y o u ' l l fo r g iv e me, I am a few minutes la te and I'm
g oin g to have to run now. Now you can g e t down to the r e a lly deep
q u e stio n s w ith a l l o f them. Come on Dave, Murray and Don.
(A pplause.)




END





Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102