Why Clinton, Congress Face Daunting Task Shrinking Washington

IS government shrinking or not?

The tax-cutting fervor sweeping Washington is setting off a scramble to cut the size and scope of government to offset the loss of revenue.

Whole Cabinet departments and agencies are now pressed to justify their very existence. Both Republicans and Democrats are reading into the election returns last month a public desire for a leaner and cheaper federal government.

But behind the moves looms the enduring question of whether Washington ever gets any smaller.

In his Oval Office speech last week, President Clinton noted that he has already trimmed the government to its smallest size in 30 years, with more cuts to come.

Yet just a few days earlier, in-coming House Speaker Newt Gingrich (R) of Georgia noted that no one in government is talking about actually cutting its size -- only slowing its rate of growth.

Both assertions are actually true, according to students of government.

The growth of federal government has leveled off considerably for a few years. By at least one important yardstick, it is actually as small now as when John F. Kennedy was president, before Lyndon Johnson's Great Society swelled social programs.

If recent history is any guide, pressure on the size of the federal government will tend to push costs down to the states, which in turn will push costs and services down to local governments.

''What it comes down to,'' says Steven Gold, director of the Center for the Study of the States at SUNY Albany, N.Y., ''is that property taxes will go up.'' Property taxes are the bedrock funding for local governments.

By the simplest measure of the size of the government, the dollar amount of the total federal budget, Washington has not shrunk from one year to the next since a slight bob in 1965. It is not likely to take another one in the foreseeable future.

Not even Phil Gramm

Even the deepest cuts proposed by Sen. Phil Gramm (R) of Texas would not actually stop the upward float of the budget.

The Balanced Budget Amendment, if passed and signed into law next year, would force a much more significant cut in spending around the turn of the century unless taxes are raised. But part of the growth in the federal government is inflation. In real dollars, that is, adjusted for inflation, the total federal budget in fiscal 1993 was lower than in 1992, and even slightly lower than the 1991 budget.

Last year's total jumped upward again, but the current fiscal year is forecast to cost about $7 billion less than last year.

A still better view may lie in the size of government as a percentage of the whole economy. By this measure, government has stayed the same or dropped each year since 1991, and the current year is the lowest percentage -- 21.6 percent of the gross domestic product -- since 1979.

Recent decreases are mainly due to economic recovery, when the gross domestic product (GDP) rises and government expenses fall automatically, rather than policy changes.

But still another measure is the federal payroll. Here the Clinton administration has made significant progress. By the end of September, the ranks of federal employees had shrunk more than 103,000 persons from January of 1993. The administration has committed itself by law to a total work force cut of 272,500 by the end of 1996.

This is the measure Mr. Clinton uses when he describes a government as small as 30 years ago.

Federal, state, and local government together show a slow upward ratchet even as a percent of GDP. Years of strong economic growth, like the current one, show a smaller government than in recession years, but the peaks and valleys keep getting higher.

Many states are wrestling the size of government down, notably Massachusetts, on both the spending and taxing sides.

Some shrinkage

Between 1990 and 1993, a study by Mr. Gold found that eight states had cut employment by 5 percent or more. In 30 states, however, employment increased. Since 1993, Gov. Christine Whitman (R) of New Jersey, after a year in office, has passed a budget only 1.8 percent higher than it was the year before -- less than inflation. She has cut state income-tax rates 15 percent and shaved corporate taxes.

But state tax cuts in New Jersey have nearly been offset by increases in local property taxes. The same effect has shown up in Michigan and Massachusetts. As the states cut their contribution to local governments, the local governments chose to raise user fees and property taxes rather than cut services, according to Mike Pagano, a political scientist at Miami University in Ohio.

Don Kettl, a Brookings Institution scholar here who has been studying the Clinton administration effort to restructure federal agencies, notes that stories on possibly closing down the Department of Transportation or privatizing the Federal Aviation Administration are running alongside stories calling for closer oversight of commuter airlines.

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