Federal spending; A cut list

Later this month President Reagan will be spelling out the federal spending slashes for which he and his aides have been preparing the nation. Then Congress, which has already announced a cut list, will have its say. As the process moves toward enactment, it is essential that short-term sacrifice be fairly shared in the interest of a healthy, vigorous, and low- inflation economy over the long range. Here is our own list, by no means exhaustive, of things that might be done. The basic aim: not to weaken the many essential and humane functions of government but to strip the fat from it.

* Revenue sharing. It is absurd that the federal government should collect money from all the people and then return it to some of them virtually without strings and often without accountability. Revenue sharing relieves the states and localities of responsibility for raising the funds they spend. Their true financial condition is thus hidden and mismanagement and inefficiency often masked. Eliminating this program (gradually, so communities have time to set in place their own revenue-raising systems) would save the federal government some

* The consumer price index. It is high time to overhaul the CPI, which measures the inflation rate and to which social security payments, federal retired worker benefits, food stamp allotments, and welfare payments (as well as wages and salaries) are tied. The index, which overstates the cost of housing and fuel-price increases and does not take into account current spending habits, is exaggerated. Periodic benefit increases are therefore larger than they really should be.

* Regulations. Out of the best of motives, Washington in recent years has issued many rules and regulations that have resulted in bureaucratic burdens for industry, a blizzard of paper work, an expansion of local and state bureaucracies, and have thus contributed to a higher inflation rate. Clearly there is need for close review of all regulations with a view to eliminating unnecessary ones and achieving greater effectiveness in carrying out those that remain.

Getting control of the problem does not mean abandoning commitment to worthwhile goals, however. Countless rules and regulations affecting the environment, health, and safety are legitimate. They represent enormous progress in society's effort to improve life for all. The problem lies often in marginal situations, where, for instance, damage to health or air is ambiguous or uncertain and the cost so high that, in the words of former regulator Alfred Kahn, "we could do far better with our resources."

* Federal pension benefits. Many government employees, including those in the military, now enjoy larger pension benefits than many workers in the private sector. Moreover, retired civil servants can go to work in the private sector and then qualify for social security in addition to their normal federal pension.

Reforms should include requiring federal employees to increase the level of contributions to their pension and life insurance funds and extending the number of work years prescribed for retirement. Over the long run, civil service workers should be integrated into the larger social security system.

* The military. There is no question the military should have the weapons and personnel needed to protect US national interests. But there is also no question enormous waste exists. Billions of dollars could be cut by more cost-effective defense systems, elimination of unnecessary military bases in the United States, better quality control at construction sites, and a firmer government hand on staggering cost overruns by the defense industry.

In addition to the military pension system, the whole issue of veteran's benefits should be looked at. The public certainly must care for those who have been disabled while serving their country. But the system is open to vast abuse. Many veterans are receiving federal disability payments for very minor disabilities, even while holding down regular jobs.

* Energy. With decontrol now driving up oil prices, the heavy subsidy for the development of synthetic fuels does not seem the best use of federal money. Some government help probably is needed, but it can be left to the changing marketplace to get this industry moving. More value for the dollar could be achieved by subsidizing energy conservation -- for example, by helping low-income families insulate their homes.

* Agriculture. The whole sticky question of farm price supports needs to be addressed. Government subsidy of the tobacco industry comes to mind first because it is an outrageous anomaly in the face of the Surgeon General's warnings against smoking.

But there are bigger challenges. Subsidies to dairy and crop farmers cost taxpayers billions of dollars annually. If this "help" aided small family farmers it might be justified. But the fact is that the biggest benefits go to the richest farmers because farm subsidies are based on production. Subsidies to the huge dairy cooperatives -- in the form of minimum prices for drinking milk sold in the open market and purchase of surplus milk not sold in the market -- result in administered rather than market prices. Surpluses are in fact deliberately produced because of the handsome subsidies received. Such government regulation, started during the depression years when there was need for it, is a clear disregard of the public interest.

* Water projects. The building of dams, canals, and other water resource projects is a favored way for senators and congressmen to make their mark with local constituents. Despite the avowed need for them -- for flood control, water supply, irrigation, maintenance of harbors, and the like -- many of the projects are of dubious value. Strong presidential leadership is needed to stand up to the Congress -- and the US Army Corps of Engineers -- which feeds the perennial push for federal pork-barrel largess.

* Welfare. So massive a subject as welfare reform demands discriminating analysis. We would only say in general that a whole range of public-aid programs need a vigorous, thoroughgoing audit to get rid of fraud and waste. It is questionable, for example, that college students from middle-class families should be able to receive food stamps or that free or subsidized lunches should be provided for children of middle-income homes.

To restrain government, however, must not mean to neglect the poor or to add to their already difficult burdens. It is the abuses of government aid which should be the target. Removing these would in fact make it possible to provide more adequate help for those truly in need.

Much more must be said on the subject of controlling the federal budget. Tax reform to reduce lost revenues, sunset laws to end useless programs -- these are but two essentials in attacking a whole range of inef ficient government activities.

But that's for another day.

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