From: millerm@CS.ColoState.EDU (mark miller)
Subject: Perot's plan and the debt
Date: Fri, 22 Jan 1993 23:58:18 GMT
Distribution: usa
Organization: Colorado State University, Computer Science Department

I was sorting through some stuff last night and I happened to find a
couple of interesting items.

The first one is a newspaper article in The Daily Camera, a newspaper
for Boulder, CO., Aug. 2, 1992, called "Ross Perot's deficit
problem -- and ours."  The article is by Jodie T. Allen of the
Washington Post.

I will summarize because I did not obtain permission to copy the
article in its entirety.

She talked about an event that I didn't know about.  She said that
sometime around the time when the article was written Perot backed
down on his commitment to reduce the deficit.  She sympathized with
him, saying maybe he realized what his followers wanted was a
miracle rather than realistic change.  An interesting thing to note is
according to the author the plan hits the middle-class the most, since
that is where the deficit problem is.  And yet Perot was often touted as
the champion of the middle-class.  Something I meant to mention before
because it was talked about on "20/20", is the fact that a person who
has received Social Security payments for more than a few years is
getting more money back than they paid into it.  The author expands on
this that this goes for health care money as well.  On raising the gas tax,
she said that a high-up Federal Reserve official known for his
aversion to taxes acknowledged that it would actually be good for the
economy!  She does not say who this official is, and does not go on
to explain why a gas tax would improve the economy.

Then there is the meaty part that explains the debt in plain numbers.
In the fiscal year 1992, the government, by official Office and
Management and Budget estimate, expected to get about $1.075 trillion
in tax revenues.  Here is the way it all lays out:

I ranked which programs were the most expensive in ()'s.

				        Debits               Balance
                                   ---------------     -------------------
Total revenue -                          ---           $1,075,000,000,000

(1) Social Security & Medicare -   $411,000,000,000      $664,000,000,000
(she said Soc. Sec. & Med. left $750 billion.  I think she added
wrong.)
(3) Interest on debt -             $200,000,000,000      $464,000,000,000
(4) Pay depositors of failed S&L's- $80,000,000,000      $384,000,000,000
(5) Pensions for Federal retirees - $78,000,000,000      $306,000,000,000
(6) Benefits for veterans -         $34,000,000,000      $272,000,000,000
(7) Operational costs of govt. -    $25,000,000,000      $247,000,000,000
(2) Defense costs -                $308,000,000,000      -$61,000,000,000

Then there's all the other stuff like feeding programs for the poor,
environmental protection, Head Start, cancer and other disease
research, farmers aid, student loans, nursing home care for needy
elderly and disabled people, welfare, space exploration, the weather
bureau, and the Coast Guard.

If the $750 billion figure after Soc. Sec. & Med. is correct the
balance would actually be $25,000,000,000 after defense costs.  She
said Soc. Sec. & Med. were "earmarked" for $411 billion.  But even
with $25,000,000,000 left over, she said the feeding programs for the
poor, for example, would use all of that up.  Everything else is on
borrowed money.

Notice that THE most expensive programs in the government is Social
Security and Medicare.  These are the entitlements programs that Perot
and later "20/20" talked about.  Defense is 2nd, and the interest on
the debt is the 3rd largest expenditure, sucking $200 billion out of
the tax revenues that could go towards something constructive! 
It's more than the S&L bailout even.

She went on to say that eliminating fraud, waste, and abuse in
government programs SOUNDS good, but it's a minor issue in the whole
scheme of things.  The deficit is so big, you could elliminate all the
programs with suspected abuses, like welfare, food stamps, Medicaid,
HUD programs, and student loans, and it would not balance the budget.

She said investing in growth also SOUNDS good, but we have a lot of
government programs like that already...in the deficit category:  Research,
highway and airport construction, job training, and aid to education,
and billions of dollars in tax breaks to encourage private investors
to put money where they otherwise would not.

She said giving the president a line-item veto could be a good idea.  The
problem is in order to close the deficit, the president would have to
veto whole sections of the budget, to heck with the lines!

Her opinion on controlling medical costs was that they are rising
because new life-saving and pain-killing technology is coming out all
the time, but people who feel entitled to that technology are not
willing to pay for it.

She concludes by saying that most voters are content to "keep living a
comfortable lie, telling pollsters, time after time, that they really
do realize that the deficit is a major drag on our economic future but
then specifically rejecting, usually by hefty majorities, any of the
spending curbs or tax hikes that are necessary to do anything about
it."

This seems to go along with my experience with strangers I met while
campaigning for an Independent congressional candidate in the 2nd C.D.
of Colorado.  I got this real feeling from them that there is a wall
or moat between the public and the government.  Neither side touches
or reaches out to each other.  They all just go about their own
business.  While they don't like the government, they don't feel they
can live without it.  So their attitude is they are happy anytime the
government gives them something, but they feel imposed upon when the
government expects something in return.

The thought that kept running through my mind is "The cynicism is
deafening."  When we were trying to get this congressional candidate
on the ballot with petition signatures, it seemed like a lot of people
felt like we were trying to hand them ANOTHER raw deal!  It wasn't
just because we were trying to run a candidate (that in itself
sometimes repulses people), but also because the campaign in the
newspaper was associated with the then defunct Perot campaign.
We were optimistic that we could have a positive influence on
government, even if Perot pulled out.  We weren't just going to give
up.  That was our inspiration for keeping the campaign going. 
Apparently the government and candidates for office have "cried
wolf" too many times, and no matter what you try to do to improve
things, some people will not believe it no matter what.

Something else that I have suspected recently is maybe one of the
reasons a higher-taxes-to-reduce-the-deficit plan was not so popular
is people, especially in the middle-class as I've heard, have paid
what they feel is a lot of taxes already, and what did it get them?  A
bigger and bigger debt.  They may have felt so fed up because of the
history of taxes they've had to pay.  They probably feel it is a
government problem that should be solved by the government, not them.
So the government itself will have to pay up, without asking for
further handouts.  I can understand this feeling, especially when you
don't trust anyone running for office.  I can especially understand it
after what I heard happened with the S&L bailout.  What happened with
that was the banking industry knew the S&Ls were going to fail, and
made a bargain with both Bush and Dukackis to not bring the subject up
during the campaign.  It didn't matter who won.  Both would've signed
the S&L bailout bill into law.  They stuck it to the people after the
election, paying for the bailout with tax dollars.  In a way the
government was responsible for the failures because Reagan loosened
regulations on bank loans, and the banks were not being as closely
monitored.  This was all brought out early last year in a Frontline
episode called "The Betrayal of American Democracy".  I think it was
based on a book that came out around then called "Who Will Tell The
People?"  In effect, the banking industry and the government were
making deals with each other so the bankers could get what they want.
The deals were practically secret, because they were not brought out
in the public eye.  So constituents seemed to have very little say in
the matter.  When the system failed, the government kept it under
wraps for as long as possible until after the '88 election, and then
the government said "GIMME!" to the taxpayers.

The other thing I found was a sidebar article in my Macroeconomics book
that I got this week.  It is titled "Macroeconomics:  Principles and
Policy" Fifth edition, by William J. Baumol and Alan S. Blinder.  The
following material is taken from the article called "Reaganomics
and the Budget:  An Insider's View", p. 217.

As we know, Reagan promised to reduce taxes and cut the fat out of
government.  He promised to balance the budget in fiscal year 1984.
This was a promise that people outside the administration did not
believe.  David Stockman's book (he was Reagan's Budget Director),
"The Triumph of Politics:  Why the Reagan Revolution Failed" talked
about how Stockman himself was the biggest skeptic on this plan
working.

The following is an excerpt from the sidebar article.  The quotations
are from Stockman's book.

     Even before he took over the Office of Management and Budget
(OMB) in January 1981, Stockman realized that supply-side tax cuts
would open a huge deficit that could be closed only by gigantic budget
cuts.  Though worried that "I was the only one who had done even a
minimal degree of . . . homework on the fundamental fiscal math," he
welcomed the opportunity.  "We would have the . . . politicians pinned
to the wall.  They would have to dismantle . . . bloated, wasteful and
unjust spending enterprises -- or risk national ruin."
     Energized by an ideological commitment to smaller government,
Stockman prepared thick books of proposed budget cuts "chock-a-block
with details and apparent precision (to) give the impression that the
economic program was being launched with . . . admirable preparation.
In fact, . . . critical loose ends were left unresolved everywhere."
Then, in February, the OMB's computer models said the tax cuts would
leave a 1984 deficit of $130 billion even with an optimistic forecast
and all the proposed cuts.  After that, Stockman "became a veritable
incubator of shortcuts, schemes, and devices to overcome the truth."
     Time was short, however, for the president was to present his
program to Congress on February 18th.  "As we went into the final ten
days, the President of the United States was not even given the
slightest warning that his economic policy revolution was bursting at
the seams . . . the final week of White House deliberations on the
economic plan gave new meaning to the concept of chaos."  The document
issued on February 18th projected a balanced budget by 1984 even
though Stockman's internal calculations were showing a deficit of $130
billion or more.  "The original budget plan I had devised . . . had
been fatally flawed . . . the massive tax cut . . . never stood a
chance of being paid for by a commensurate shrinkage of the welfare
state."
     Negotiations with Congress widened the budget gap as spending
cuts were trimmed and tax cuts fattened.  Stockman's budgeteers tried
to square the circle with accounting gimmicks, but by November 1981
"it had become overwhelmingly clear that the . . . original political
and economic assumptions were wrong by a country mile . . ..  Now even
the most outlandishly optimistic forecast . . . gave us triple-digit
deficits . . . as far as the eye could see."

------------------------ End of excerpt -------------------------------

I am not trying to put this up to put the blame for the deficit and
debt squarely on the Reagan Administration.  I look at it as one
piece of the puzzle found on who was responsible for the massive rise
in the debt during the 80s and why it happened.  I know Congress had
its part to play in it too.  I have been looking for material like
this for a long time.  We need to learn from history so that if/when
this deficit and debt problem is solved we won't do it again.  We need
to understand how and why it happened the way it did.  The voters are
one reason for it.  That's for sure.  And we know the Reagan
Administration was not innocent in the matter either.  If it was one
thing that really bothered me about the finger-pointing in Washington
it was that the president blamed Congress for the debt, and
Congress blamed the president.  In the end, it was all muddled about
how this debt came to be.  Perot put it very aptly when he said
sarcastically, "No one is taking responsibility for it.  I don't know.
With the way they're talking in Washington, you'd think aliens came
down and gave us this problem!"

|Mark Miller, computer science   |"Like a government, the operating system   |
|major at C.S.U.                 |performs no useful function by itself."    |
|millerm@cs.colostate.edu        |   --- Operating System Concepts           |
|mmiller@nyx.cs.du.edu           |"Let me ask you something.  Is the         |
|                                |government worth preserving when it lies   |
|                                |to the people?" --- "JFK"                  |
|        "FATHER!...FATHER!...THE SLEEPER HAS AWAKENED!" --- "Dune"          |

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