Kemp's Spending at HUD

Conservative Jack Kemp proved to be a very big spender as secretary of housing and urban development in President Bush's administration

By , a policy report of the Ludwig von Mises Institute.

FORMER San Antonio Mayor Henry Cisneros will soon replace Jack Kemp as secretary of housing and urban development. What will Mr. Cisneros inherit from Mr. Kemp?

Kemp is often credited with lifting the spirits of HUD employees, and it is easy to see why. During his tenure, the agency's budget grew dramatically - so much so, in fact, it is hard to believe a "conservative" headed it up.

According to the Office of Management and Budget, Kemp's agency started with a budget authority for fiscal year (FY) 1989 of $14.3 billion, and his final budget authority for FY 1991 was $27.6 billion, an increase of 93 percent. Total HUD outlays went from $19.6 billion in FY 1989 to a forecast $28.1 for FY 1993 - a 43 percent increase. HUD spending as a percentage of the total budget increased from 1.1 percent to 2 percent in the Kemp years.

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This is a fantastic amount of growth for a single agency, and it is completely inconsistent with the pace of overall government spending.

President Bush gave HUD a 16 percent increase for FY 1993, which made it the fastest growing cabinet-level agency in the government. Liberals sometimes complain of "cuts" in HUD's budget under Reagan, though they were only minor, but right now the agency spends well over twice the annual amount it did at the end of the Carter era. Overall, HUD's present spending rivals the spending increases that occurred under the administration of President Lyndon Johnson. But LBJ's final HUD budget was $713 million, a

mere 2.5 percent of Kemp's.

What accounts for the huge increase? It is certainly not the doing of Congress, which cut Kemp's budget request in FY 1992 by $500 million. HUD officials like to blame the increase on the renewal of expiring Section 8 subsidy contracts. It is true that these renewals account for almost $2 billion in the last two years, but Kemp promised to end such housing subsidies and give homes to the poor as an alternative. He had the power to end the programs and chose not to. Thus, while such contracts may be a pa rtial explanation, they are not an excuse. Subsidizing mortgages with taxpayer dollars cost a $2 billion-plus increase.

Also added to the kitty were federal grants for "community planning and development," which includes giving money to states and localities for shelters and food for the homeless. Every year since 1989, Congress has actually cut Kemp's request for spending on the homeless by about $100 million.

The fact is that there are many more demands being made on the agency today than in the past, and the sheer number of programs it administers has grown exponentially under Kemp. His internal HUD think tank spent more than $75 million in the last two years. Staff salaries went up even more.

Kemp's pet programs put the agency over the top of the spending mark. These include such programs as HOPE (Home ownership and Opportunity for People Everywhere), PASS (Plan for Achieving Self-Support), Revive, Restore, Operation Occupancy, Operation Take the Boards Off, Choice in Management, and Moving to Opportunity.

Another expensive program started by Kemp was designed to conduct sting operations against private mortgage lenders to check for discrimination. It was the first time such institutions were subject to this degree of scrutiny.

Labor unions were given special treatment during Kemp's tenure. He reclassified a series of public housing projects as "development" instead of "maintenance" so as to bring them under the Davis-Bacon Act, which requires the government to pay union wages, which are two or three times higher than market level. The difference cost millions.

When Kemp took this job four years ago, he inherited an agency riddled with waste and influence peddling. The special prosecutor handling the 1980s HUD fiascoes is still on the job today, handing down indictments and obtaining plea bargains. Many people would have been appreciative if Kemp had cleaned up the agency from the 1980s. That's what he promised to do.

One month after the 1992 election, HUD's office of the inspector general (IG) released one of its periodic assessments of HUD's financial soundness - and the results were disturbing. The IG warned that overall problems "still exist" and that "another HUD scandal is a distinct possibility." According to the IG report, rental housing subsidized by the taxpayer has been plagued with unreliable estimates, bookkeeping inaccuracies, and faulty budget requests.

For example, an April 29 Government Accounting Office report pointed out that while HUD was claiming a $407 million shortfall in a rental assistance fund, the fund actually had a surplus of $1.2 billion. This is the seventh negative audit issued since 1989.

Kemp's legacy at HUD was not that of a conservative. Cisneros, a certified big-government liberal, may well appreciate the $28.1 billion bequest Kemp will pass on to him.

Indeed, in an interview recently, he said "I admire a lot about Jack Kemp." But Cisneros also inherits an agency that is far from having its books in order. Before he starts adding more divisions in an effort to pursue a Democratic housing policy, he is well-advised to clean up the house that Kemp failed to keep.

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