New (1981) Ideas for Economic Stability
This is the second installment of 30 year old leadership principles that are forgotten or ignored by current policymakers in the USA. I think they ring true, and if a politician quotes Reagan…make sure it’s not just one line to justify their idea…Reagan was consistent, concise, and direct. Here is what he said after a few WEEKS in office. Not THREE YEARS like Obama. Actions speak louder than words.
“Each Executive Dept and Agency cut travel by 15% from amounts available for the remainder of the Fiscal Year. (This also includes Michelle Obamas trips all over the world with her two Senior Executive Policy Advisers…ie her children)
Cut obligations for consulting, management and professional services, and special contract studies and analyses by 5% from the amounts shown in the budget (is there a budget?)
Stop procurement of furniture, office machines and other equipment except military equipment and equipment needed to protect human life and property.
Members of the Cabinet and other appointees set an example by avoiding unnecessary expenditures in setting up their personal offices. Appointees are not to redecorate their offices.
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 away from them. Well, I regret the fear that these unfounded stories have caused, and I welcome this opportunity to set things straight.
All in all, nearly $216 billion worth of programs 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. 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 in 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 8 percent of the total educational funding, and for this 8 percent, the Federal Government has insisted on tremendously disproportionate share of control over our schools. Whatever reductions we've proposed in that 8 percent will amount to very little in the total cost of education. They will, however, restore more authority to States and local school districts.
There are a number of subsidies to business and industry that 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 activities 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 $3.2 billion by leaving to private industry the building of plants to make liquid or gas fuels from coal.
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 2 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 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 from those it lends the money to. And this difference, of course, is paid by your constituents -- the taxpayers. They get hit again if they try to borrow, because government borrowing contributes to raising all interest rates.
By terminating the Economic Development Administration, 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.
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 fiscal year 1982 by removing from eligibility those who are not in real need or who are abusing the program. But 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 the fiscal year 1982.
Earlier I made mention of changing categorical grants to States and local governments into block grants. Now, we know of course that the 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 decisionmaking 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 5 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 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 the 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 $1 billion next year.
Now, 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.
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 1 to 10 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've called it before -- an unrelenting national scandal, a scandal we're bound and determined to do something about.
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 to 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 3 years in the tax rates for all individual income taxpayers, making a total cut in the tax-cut rates of 30 percent. This 3-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.
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 business men and women, as well as large businesses to defer or terminate plans for expansion. And since they're responsible for most of the new jobs, those new jobs just aren't created.
Now, we have no intention of dismantling the regulatory agencies, especially those necessary to protect environment and assure the public health and safety. However, we must come to grips with inefficient and burdensome regulations, eliminate those we can and reform the others.
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.
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 raise the old familiar cry, ``Don't touch my program; cut somewhere else.'' I hope I've made it plain that our approach has been evenhanded, 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, 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're 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 corners of America; the interest on the thrift of our people and the returns for their risk-taking. The production of America is the possession of those who build, serve, create, and produce.
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. 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 we can reduce the budget by $41.4 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, 1,400 pages of regulations, 5,000 Federal employees who presently administer 7,600 separate grants in about 25,000 separate locations. Over 7 million man and woman 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 eliminating inflation, stimulating the creation of 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? If we don't do this, inflation and the growing tax burden will put an end to everything we believe in and our dreams for the future.”
If you are too young to remember Reagan, that’s a shame. He was a guiding light of decency in the world. He was courteous, polite, strong, and dedicated. A true gentleman. If we only had ONE more like him in the world that could unite and get order back into the USA.
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