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Ronald Reagan Presidential Library
Digital Library Collections
This is a PDF of a folder from our textual collections.
Collection: Blackwell, Morton: Files
Folder Title: Economic Package
Box: 7
To see more digitized collections visit:
https://reaganlibrary.gov/archives/digital-library
To see all Ronald Reagan Presidential Library inventories visit:
https://reaganlibrary.gov/document-collection
Contact a reference archivist at: [email protected]
Citation Guidelines: https://reaganlibrary.gov/citing
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4% HBC DEFENSE NUMBER IS PHONEY:
REAL CUT MUCH DEEPER
84
Deno
1984 Real Growth Rate is 2.3%
4% real defense growth claim based on HBC staff error:
Omitted impact of 4% pay raise in real growth
calculation, and used lower inflation assumptions than
CBO figures used in rest of HBC resolution.
CBO memo of 3/18/83 to Senate Budget Committee
(attached) verifies 2.3% real defense increase in the
HBC budget resolution.
HBC $9.3 billion 1984 outlay cut would require bigger program
reductions than proposed in McNamara/Vance list.
HBC 4% pay raise requires $2.5 billion outlay add-on to
President's defense function request.
To achieve HBC defense function outlay number of $235.4
billion would therefore requires $12.4 billion outlay
reduction from non-pay part of President's defense
budget.
McNamara/Vance cut list resulted in only $7.0 billion in
non-pay defense outlay savings.
To achieve only 56% of the HBC proposed 1984 outlay cut
for defense non-pay, McNamara/Vance reduces or
eliminates following:
Eliminate B-1 Bomber
Cut ballistic missle defense R&D by 50%
58% cut for M-1 tank
34% cut for Bradley infantry fighting vehicle
Cancel AH-64 helicopter
Cut patriot defense missile by over 50%
Cancel F-14
Cancel F-15
Cancel AV-8B close air support aircraft
Cut 1 Aegis cruiser
Cancel amphibious ship (LHD-1 program)
50% cut in precision munitions such as
Cancel MX basing and missile production
Reduce continental air defense and C3
HBC $16.4 billion defense budget authority cut is vastly
understated -- two-times-bigger cut needed to achieve
HBC outlay ceiling.
Average first-year spend-out from non-pay accounts is
only 35% -- reflecting a range between 68% for O&M
purchases and 14% for procurement.
To achieve $12.4 billion in outlay savings from non-pay
accounts (and $9.9 billion net outlay savings after HBC
4% pay increase) would require a $34 billion budget
authority cut from non-pay accounts.
This is two times larger than HBC's claimed $16 billion
cut in budget authority -- only alternative would be
drastic cut in faster- spending O&M readiness
expenditures.
CONGRESSIONAL BUDGET OFFICE
Alice M. Riviln
U.S. CONGRESS
Director
WASHINGTON, D.C. 20515
March 18, 1983
MEMORANDUM
TO: Paul Heilig
FROM: Mick Miller
To answer your questions about defense inflators, pay raise
assumptions, and real growth in the House Budget Committee
recommendation, I have prepared the following short analysis.
In previous memos and fact sheets, I have shown fixed rate-real
growth paths for defense budget authority (BA) assuming the pay raises
contained in the President's Request. Because pay raises are considered to
be price growth for personnel, CRO and both the current and previous
Administration have adjusted their "defense deflators" for actual and
proposed pay raises. For example, with no 1984 pay raise, the 1984 defense
inflation rate is 4.1 percent (BA), but a 4 percent military and civilian pay
raise would increase it to 5. percent and cause the fixed-rate growth paths
to be higher essentially by the amount of the pay raise (there would be some
compounding).
Five percent rcal growth in 1984 with no pay raise would be about
$267 billion, but with a 4 percent pay raise it would increase, to about
$270 billion. Outlays, of course, can vary widely depending on the program
mix within the budget authority total. The attached table shows total
budget authority associated with fixed rate-real growth paths of 1 to 10
percent.
Also, I have been assuming that no supplemental or rescissions would
be cnacted for 1933; a higher/lower base reduces/increases the rate of real
growth for a given 1984 total. For example the House Budget Committee
recommendation contains about 2.8 percent real growth measured against a
lower current law base but about 2.3 percent measured against the higher
1983 base contained in the recommendation.
CC: Bob Walters
Budget Authority Assuming Fixed Rates of
Real Growth and 4 Percent Annual Pay Raises
(By fiscal year, in billions of dollars)
Real Growth
Rate (%)
1934
1985
1986
1987
1988
1
259
276
294
313
333
2
262
282
303
325
350
3
264
287
312
338
367
4
267
293
321
352
386
5
270
298
330
365
404
6
272
304
340
380
424
7
275
310
349
394
444
8
277
316
359
409
466
9
280
322
369
424
488
10
282
327
380
440
510
The Backgrounder
Herîtage Foundation
№555
The Heritage Foundation
513 C Street
N.E.
Washington, D.C.
20002
(202) 546-4400
March 22, 1983
Tap File Indepring
TAX INDEXING: AT LAST A BREAK
FOR THE LITTLE GUY
INTRODUCTION
During the 1970s, bracket creep became U.S. taxpayers' enemy
No. 1. Even if workers received pay raises keeping up with inflation,
real after-tax wages declined since many were pushed into higher
tax brackets. The taxpayer found himself on an accelerating tax
treadmill. Average- and lower-income Americans routinely faced
tax rates once reserved for the rich. While only some 3 percent
of taxpayers faced marginal tax rates of 30 percent or above in
1960, by 1981 bracket creep had shoved 34 percent of them up to
the 30 percent level or higher.
Finally something was done about bracket creep. The Economic
Recovery Tax Act (ERTA) of 1981 provides that all tax rate brackets,
the zero bracket amount (formerly the standard deduction). and
personal exemptions are to be indexed for inflation, beginning in
1985. No longer will taxpayers be pushed into higher tax brackets
simply because inflation increases their nominal income. Bracket
creep in effect was to be buried.
Now, some in Congress are having second thoughts and want to
repeal the measure, before it even begins. They want to perpetuate
bracket creep and, with it, their power to tax by the backdoor
and enable the government to profit from inflation-causing programs.
Without indexing, every 10 percent inflation will give the govern-
ment a 17 percent tax windfall. Paying for this, of course, will
be the American taxpayer, particularly average Americans and the
working poor. They have been the most hurt over the last decade
as inflation has pushed them into higher tax brackets. They
would be the most hurt should indexing be eliminated.
About 80 percent of the relief generated by tax indexing
benefits taxpayers earning less than $50,000 a year. Those
taxpayers making above $200,000 a year will get only about 1.2
percent of the tax relief. If Congress repeals indexing, the tax
Note: Nothing written here is to be construed as necessarily reflecting the views of The Heritage Foundation or as an
attempt to aid or hinder the passage of any bill before Congress.
2
liability of the lowest-income Americans would increase in one
year by ten times the percentage increase of the highest income
groups. The $10,000 bracket would face a 14 percent hike in the
first year alone, but the $200,000 income groups would pay only
about 1.3 percent higher taxes.
Even with moderate inflation the tax liability of the lowest
income bracket would be 60 percent higher in 1988 than it would be
with indexing. This would be balancing the budget on the backs of
average Americans and the working poor. Repeal of indexing,
according to a Department of Treasury study, essentially would
eliminate the 25 percent income tax reductions for all taxpayers
except the very rich by 1989. Tax rates on every income family,
except the rich, would rise to record highs in only a few years.
In short, indexing is a break for the average American taxpayer.
To repeal indexing is to penalize the working man and woman.
The campaign by some members of Congress to repeal indexing
would nullify probably the most important tax reform provision of
the Reagan economic program. This program, designed to stimulate
the economy by allowing individuals to keep and save more of what
they earn, is a complex mosaic. Among its many components:
1. Private Capital Formation. Reducing the top rate of tax
on individuals from 70 percent to 50 percent and expanding the
eligibility for IRAs and Keoghs were moves designed to increase
the capital available for new enterprises and investment. These
measures have already boosted confidence for business startups
and generated tangible economic benefits: the savings rate has
surged 30 percent to 6.9 percent of disposable personal income in
the third quarter of 1982, the stock market is at a record high,
funds in IRAs and Keoghs have nearly doubled in just one year,
and the venture capital industry has grown rapidly.¹
2. Business Tax Reform. Accelerating and simplifying the
depreciation allowances available for machine tools and other
capital equipment was enacted to spur American business to invest
in new factory equipment and tools. Although about 70 percent of
the 1981 business tax cuts were repealed in last summer's tax
hike package, American business is still expected to enjoy a
vigorous recovery and begin to hike capital investment significantly.
As it was, despite the severe recession, business and industrial
outlays for capital equipment (after an inflation adjustment)
shrunk only one-third of the amount experienced in the 1974-1975
economic downturn.
3. Tax Relief for Lower and Middle Income Americans. The 25
percent income tax cut and tax indexing provide average and
1
See Thomas Humbert, "Reaganomics: Making Gains," Heritage Foundation Back-
grounder #239, January 21, 1983.
3
working Americans with much needed relief after nearly two decades
of skyrocketing taxation. When indexing begins in 1985, it will
force the government to tax openly and deliberately and to stimulate
work, savings, and jobs by lowering marginal tax rates.
Those aspects of the Reagan tax strategy that took effect
during the first twelve months--the capital formation initiatives
and the business tax cuts--generally provided corporations and
upper-bracket Americans with the lion's share of the benefits.
of course, even these early provisions generate important benefits
for a broad range of income groups as a quickened pace of investment
and saving activity stimulates economic growth. But the remainder
of the program--and especially tax bracket indexing--is targeted
directly at the grass-roots taxpayer. It is this group that
will gain the most from the ten percent tax cut scheduled for
July. And it is this group that will be the primary beneficiaries
when individual tax brackets are indexed to the rate of inflation.
Only the 1983 income tax cut and indexing will save average and
working Americans from the highest tax burden in history.
THE IMPORTANCE OF INDEXING
Bracket Creep is a Hidden Tax. Bracket creep is a hidden
tax, requiring no action by Congress. Example: Under the terms
of the 1984 tax code and without indexing,2 a family of four
making $25,000 a year in 1984 would have to make $27,500 one year
later to earn the same pre-tax real income. With $27,500, the
family's real income is effectively the same, but its tax bill
increases from $1,621 to $1,953. Although the family's income
has grown by 10 percent, bracket creep increases its federal
taxes by over 20 percent. The family faces a marginal tax rate
of 18 percent compared with the 16 percent it faced before, and
its average tax rate has jumped from 6.5 percent to 7.1 percent.
If the family's taxes had remained constant with inflation,
it would have paid $1,783, instead of the $1,953. As such, even
though pre-tax income kept abreast of inflation, the family's
real after-tax purchasing power was reduced by $170. This repre-
sents an inflation tax, and the taxpayer's loss becomes the
government's gain. In this case, the 10 percent inflation raised
government revenues over 20 percent. In the aggregate, for all
income classes, a 10 percent increase in inflation generates a
17 percent increase in government revenues.³ The higher the
inflation rate, the higher the inflation tax.
2
This example is based on the 1984 tax code and assumes that the third
year of the tax cut is not repealed. The calculations are based on a
family of four with all income from wages and salaries and no tax pre-
ferences or adjustments to income. Itemized deductions are assumed to be
23 percent of income.
3
The 1983 Joint Economic Report on the February 1983 Economic Report of the
President, Joint Economic Committee, March 3, 1983.
4
Indexing would eliminate this inflation tax by adjusting
both the top and bottom amounts of each tax bracket according to
the inflation rate. The zero bracket amount (formerly the standard
deduction) and the personal exemption also would be increased by
the inflation rate. After indexing takes effect, every 10 percent
increase in inflation would increase tax revenues by only 10
percent rather than 17 percent. In the case above, indexing
would have ensured that the family's real after-tax income was
unaffected by inflation--its marginal and average tax rates would
be unaltered.
Indexing Helps the Lower-Paid. Taxpayers in the lowest
income categories suffer most from inflation and, accordingly,
will benefit disproportionately from indexing. The reasons:
1) with so many upper-income Americans now in the
maximum tax bracket of 50 percent, bracket creep is of
importance only to middle- and lower-income taxpayers;
2) changes in marginal tax rates are more frequent in
lower-income categories, especially $15,000-$30,000,
than in higher ones;
3) movement from one income tax bracket to another is
more common at lower-income levels because the width of
the brackets increases as income rises;
4) the zero bracket amount and personal exemptions
erode in value as inflation rises, unlike most itemized
deductions used by higher income groups.
Although all Americans are hurt by bracket creep, the effect
is less at higher incomes. In a year of 8 percent inflation, for
instance, the average tax bite increases by a high of 26 percent
for the $12,000 income earner, to just 9.6 percent for taxpayers
making $150,000.
The inflation tax accelerates over time, much like compound
interest. As Chart I shows, ten years of 8 percent inflation
would increase the taxes of Americans by between 130 and 430
percent, with the largest tax increases reserved for lower incomes,
while money incomes would have increased over the same period by
just 116 percent. Taxes for all income brackets increase by more
than ten times the one-year increase. Taxes on the $18,000
income bracket, for example, increase 16½ percent in one year of
8 percent inflation, but taxes over ten years under such an
inflation rate increase by 33 percent--twenty times the first
year's tax hike.
With the inflation rate in the 1970s averaging about 6.5
percent a year, tax liabilities increased substantially for all
income levels. On the average, taxes increased by 1.7 times
faster than the inflation rate. Because of this, the nine major
5
tax reductions enacted by Congress in the 1960s and 1970s did not
reduce taxes at all. They simply offset about half of the cumula-
tive tax increase due to inflation. While Congress claimed
credit for cutting taxes, it actually was collecting tax windfalls
from inflation. With this windfall, it enacted more programs and
bloated the federal bureaucracy.
These skyrocketing taxes have exacted a heavy punishment on
enterprise, investment, and saving. Why work, invest, or save
when the government takes such a large chunk of profits or wages?
It is no wonder that the American economy began sputtering and
eventually fell into the worst recession in four decades.
CHART 1
Percentage increases in federal income taxes due to salary increases and
the portions of the increases due to bracket creep
(8% annual inflation rate)
Initial
Increase in
Portion due to
salary
federal tax
bracket creep
Part A -- after an interval of 1 year
$ 12,000
25.8%
68.9%
15,000
18.1
55.8
18,000
16.5
51.6
21,000
16.3
51.0
24,000
16.7
52.0
27,000
15.8
49.3
30,000
15.5
48.4
50,000
15.3
47.7
100,000
10.6
24.7
150,000
9.6
16.4
Part B -- after an interval of 10 years
$ 12,000
438.1%
73.5%
15,000
361.5
67.9
18,000
337.1
65.6
21,000
332.2
65.1
24,000
325.8
64.4
27,000
316.8
63.4
30,000
305.7
62.1
50,000
224.9
48.5
100,000
153.8
24.6
150,000
138.7
16.4
Source: Journal of Accountancy, January 1982.
6
THE IMPACT OF REPEALING INDEXING
Indexing was designed to arrest the steep climb of marginal
tax rates with its damaging effects on incentives and enterprise.
Indexing is, in effect, the most significant achievement of the
taxpayer's revolt, representing the most far-reaching tax reform
for the lower-bracket taxpayer--the little guy--in the past two
decades. It is a guarantee that Washington no longer will take a
bigger tax bite out of the workingman's paycheck just because
inflation increases nominal income.
CHART II
The Effect of Repealing Indexing,
Distributed by Adjusted Gross Income Class
(1981 Levels, 1984 Law)
Adjusted
Share of all taxes
Share of benefits dues
gross income
paid as of
indexing (assuming 4.5
class
1984
percent inflation)
($000)
(percent)
(percent)
Less than 10
2.1%
6.5%
10 - 15
5.8
7.4
15 - 20
8.1
9.2
20 - 30
20.7
22.2
30 - 50
29.9
32.4
50 - 100
17.7
16.3
100 - 200
8.6
4.8
200 and over
7.1
1.2
Total
100.0%
100.0%
Source: Office of the Secretary of the Treasury
Office of Tax Analysis
With inflation expected to range betwen 4 and 5 percent a
year after 1985, indexing will give taxpayers about $98 billion
in relief from the inflation tax between 1985 and 1988. Taxpayers
making below $50,000 a year will receive the lion's share of the
relief--about $78 billion. Currently, this group pays about
two-thirds of all income taxes and will receive about 80 percent
of the tax relief from indexing. Taxpayers earning below $15,000
contribute 7.9 percent of the total taxes, but will receive 13.9
percent of the benefits from indexing. The wealthy, on the other
hand, will receive much smaller benefits. Just 1.2 percent of
the tax relief from indexing will go to taxpayers making $200,000
or more, although they contribute 7.1 percent of total taxes (see
Chart II).
If Congress repeals tax indexing, the tax liability of
low- and middle-income Americans would increase in the first year
by a far greater percentage than that of Americans with income
over $50,000. After only one year of an unindexed tax code, a
wage earner making $10,000 would pay 14 percent higher taxes; the
$30,000 tax bracket, 3 percent higher taxes; and the $200,000
bracket, only 1.3 percent higher (see Chart III).
7
This would occur in the first year. After four unindexed
years, Americans, especially lower-income groups, would face even
higher average and marginal taxes. Without indexing, taxes on
the $0 to $5,000 income class would be 60 percent higher in 1988
than with indexing; taxes on the $15,000 to $20,000 income group
would be 14 percent higher; taxes for the $200,000 to $500,000
group would be just 3 percent higher. The overall taxpayer
liability, if indexing were repealed, would increase by 3 percent
in 1985, 6.5 percent in 1986, almost 9 percent in 1987, and over
11 percent in 1988.
Chart III
Change in Income Tax Liability Due to Repealing
the Indexing Provision Enacted in ERTA
(Four-Person, One-Earner Family)
(dollars)
Tax liability
Change in tax liability
Income
under 1984
due to repealing indexing
law
Amount
Percentage
$10,000
$ 291
$ 41
14.1%
20,000
1,549
41
2.7
30,000
3,003
94
3.1
40,000
4,874
169
3.5
50,000
7,165
249
3.5
100,000
22,056
463
2.1
200,000
58,190
777
1.3
Source: Office of the Secretary of the Treasury
Office of Tax Analysis
Note: Tax liabilities are calculated assuming that deductible expenses
equal 23 percent of gross income and that all income is wages.
Repeal of indexing would mean an enormous increase in taxes.
The median income family of four, earning $24,000 in 1982, would
pay $1,000 in additional taxes between 1985 and 1988 if indexing
were repealed. As Chart IV shows, the family's average tax rate
would increase from 9.17 percent in 1984 to 10.41 percent by
1988. This means that the Reagan tax cuts would be wiped out
after only four years of moderate inflation. Only the rich would
stay ahead of the game.
4
Figures are 1982 adjusted gross income levels, and 1984 law.
MEDIAN INCOME FAMILY OF FOUR EARNING $24,000 IN 1982
AVERAGE TAX RATES AFTER COST OF LIVING ADJUSTMENTS
1979 - 1988
Tox as
Percent
of Income
11.5
11.0
10.66%
INDEXING
CHART V
8
REPEALED
10.5
10.41%
10.15%
10.11%
10.12%
10.0
9.81%
9.49%
9.49%
9.5
9.34%
CURRENT LAW
9.15%
9.15%
9.15%
9.15%
9.17%
9.0
1979
80
81
82
83
84
85
86
87
88
SOURCE:TREASURY DEPARTMENT
9
THE OBJECTIONS TO INDEXING
Deficits
Opponents argue that indexing will contribute to the burgeon-
ing budget deficit. Some even claim that the U.S. is an undertaxed
society. Yet indexing would not prevent Congress from increasing
taxes if needed. It simply assures that legislators must go on
record and vote for hikes, rather than simply depend on inflation
to do it for them. And even with indexing and the Reagan tax
cuts, taxes will not decrease. At best, they will remain at
1981's historically high levels, thanks to bracket creep, new
social security taxes, and the 1982 tax bill hike, which, combined,
will wipe out most of Reagan's $600 billion tax relief measure of
1981.
Without the Reagan tax cuts, of course, things would be much
worse. Marginal tax rates would be from 4 to 10 percentage
points higher, and tax revenues as a percentage of GNP would be
up 3 to 4 percentage points. But even with the Reagan cuts,
Americans in all income bracket will pay about the same percentage
of their income in 1988 as they did in 1981. Chart V indicates
that those in the half median income bracket, for example, in
1981 paid 20.11 percent of their income for income and social
security taxes and will pay an estimated 20.9 percent in 1988.
No tax cut there. The median income taxpayer paid 25 percent of
income in income and social security taxes in 1981, and will
still pay 24.74 percent in 1988. The twice median income earner
goes from 26.87 percent in 1981 to about 25.83 by 1988. This
hardly amounts to a huge tax cut. Clearly, the Reagan tax cuts
are not causing the deficit-- because taxes have not been cut
very much.
Chart V
Average Tax Rates Under FICA and Individual Income Tax
half median
median
twice median
1980
18.28
23.68
24.77
1981
20.11
25.09
26.87
1985
20.60
24.36
25.24
1988
20.92
24.74
25.83
Source: Office of the Secretary of Treasury, Office of Tax Analysis
Inflation
Opponents of indexing claim that, if taxpayers are protected
from the harmful effects of inflation induced bracket creep, the
resolve to fight inflation will weaken. Indexing supporters
counter that the reverse is true. Without indexing, the government
has an incentive to encourage inflation since it receives the tax
windfall from bracket creep. Indexing takes away this incentive
by eliminating the windfalls.
10
CONCLUSION
Indexing provides, at long last, a tax break for the little
guy. It introduces an extraordinary measure of fairness into the
U.S. tax system. Indexing also preserves the integrity of the
American democratic process. It means that if Congress desires
higher taxes, each member must go on record and vote to increase
taxes openly and deliberately. No longer can Congress depend on
the subterfuge of bracket creep to raise taxes silently.
Indexing does not mandate a level of government spending nor
does it freeze revenues at a specific level. It is simply a
procedural reform to guarantee tax honesty by the nation's legisla-
tors. The integrity of American democratic institutions and
elementary notions of fairness are at stake.
Yet some Republicans and Democrats want to eliminate index-
ing--ironically, in the name of fairness. But is it fairness
when tax rates once reserved for the rich are imposed on middle-
and even lower-income taxpayers? Is it fair that the federal
government gains from inflation at the expense of those American
working men and women least able to pay? Is it fair that Congress
can raise taxes without recording a vote? Is it fair that Congress-
men claim credit for cutting taxes when they are simply returning
some of the revenue bonus from the inflation tax? of course not.
If Congress repeals indexing, it will overturn one of the fairest
and most beneficial tax reforms in recent U.S. history. The
little guy needs a tax break. Congress and President Reagan gave
it to him in 1981. It would be unfair for Congress to take it
back.
Thomas M. Humbert
Walker Fellow in Economics
FYI:
JV, DJ, MB, BT, WV, HZ, TD, VK, BS, AV, MG
Budget 1983
Document No.
WHITE HOUSE STAFFING MEMORANDUM
March 22
DATE:
ACTION/CONCURRENCE/COMMENT DUE BY:
BRIEFING PACKET ENTITLED "HOUSE DEMOCRATIC BUDGET PLAN:
SUBJECT:
A RADICAL ATTACK ON TWO YEARS OF PROGRESS" prepared by OMB
ACTION FYI
ACTION FYI
VICE PRESIDENT
GERGEN
MEESE
HARPER
BAKER
11
JENKINS
DEAVER
MURPHY
STOCKMAN
ROLLINS
CLARK
WHITTLESEY
DARMAN
P
SS
WILLIAMSON
DUBERSTEIN
VON DAMM
FELDSTEIN
BRADY/SPEAKES
FIELDING
ROGERS
FULLER
Remarks:
Richard G. Darman
Assistant to the President
(x2702)
Response:
HOUSE DEMOCRATIC BUDGET
PLAN: A RADICAL ATTACK ON
TWO YEARS OF PROGRESS
MARCH 22, 1983
I. FRONTAL ASSAULT ON EVERY ELEMENT OF 1981-82 NATIONAL POLICY
REDIRECTION
Raises taxes $315 billion over five years - cancelling 42% of 1981-82 tax cut.
Wipes out lower/middle income tax relief by cancelling both third year tax cut and indexing.
Raises FY83-88 tax burden on families under $50,000 by $199 billion and amounts to an extra
$3,550 in taxes for average income family over the period.
Launches five-year domestic spending spree amounting to $181 billion add-on to President's
request for non-defense programs.
Makes radical defense cut of $206 billion in budget authority over five years resulting in lower
defense funding than last Carter budget - cancelling entire national defense rebuilding effort.
Restores failed pump-priming approach after recession has ended (first quarter GNP up 4%) with
$58 billion 1983-84 add-on for anti-recession and social spending programs.
Spurs runaway entitlement growth by repealing $10 billion of previously enacted food stamp,
welfare and medicaid reforms, and flatly rejecting $71 billion in new five-year entitlement savings
proposed in President's budget.
Shatters two-year Administration/Congressional consensus for domestic spending restraint, lower
taxes and defense rebuilding. Compared to President's budget for 1984-88:
Taxes up $114 billion
Defense cut $206 billion
Domestic spending up
Failed 1970's/Carter policy and
$181 billion
priorities fully restored
1
II. NEAR-TERM (1983-84) IMPACT: EVERY COMPONENT OF THE BUDGET
GOES THE WRONG WAY - AT THE SAME TIME
Due to extravagant $58 billion pump-priming initiatives and start-up of ten major new domestic
programs, 1983-84 outlays up dramatically from President's budget.
Despite House Democratic tax increases and defense cuts, overall 1983-84 impact compared to
President's budget is -
Domestic spending up by $45 billion
National security down by $10 billion
Taxes up by $24 billion
Deficit still up by $8 billion
2
DEMOCRATIC PLAN VERSUS
ADMINISTRATION BUDGET
1983-1984
+
$45 BILLION
+ $27 BILLION
NATIONAL
+ $8 BILLION
SECURITY
TAXES
DOMESTIC
DEFICIT
SPENDING
$10 BILLION
3
III. MASSIVE $315 BILLION TAX INCREASE: CANCELS 42 PERCENT OF 1981-82
TAX REDUCTION AND RAISES BURDEN ON LOWER/MIDDLE INCOME AN
AVERAGE OF $40 BILLION/YEAR
Impact on Enacted Tax Cuts
1984
1985
1986
1987
1988
Total
(billions)
Net tax cut enacted in 1981-82
-93
- 121 -
- - 154
-178 -
-207 -
- - 753
: .
Democratic plan tax increase
+ 35
+48
+ 58
+74
+100
+315
....
Percent of tax cut cancelled
38%
40%
38%
42%
48%
42%
.....
Proposed cancellation of third-year cut and tax indexing will raise taxes of average worker by
$3,550 over the period and aggregate tax burden on lower/middle income taxpayers by a
staggering $199 billion over FY83-88.
Tax Increase For -
1983
1984
1985
1986
1987
1988
Total
(billions)
Under $20,000
+1
+5
+7
+10
+ 13
+16
+52
$20,000-$50,000
+4
+ 16
+21
+28
+35
+43
+147
Total, lower/middle
income
+5
+21
+ 28
+ 38
+ 48
+59
+ 199
% of total Democratic tax
increase imposed on lower
and middle income
-
60%
58%
66%
65%
59%
63%
4
Proposed allocation of 64% of Democratic plan tax burden increase to lower and middle income
taxpayers reveals hypocrisy of "fairness" issue.
86% of tax cut due to 1978 capital gains reform and reduction of top marginal tax from 70
to 50% went to above $50,000 taxpayers - but no change proposed by Democratic plan.
74% of tax cut due to third-year rate cut and tax indexing go to families below the $50,000
income class - - yet Democratic plan proposes total repeal.
Democratic plan throws national tax reduction objective out-the-window by proposing highest
average tax burden in post-war history relative to GNP:
Tax Burden
Relative to GNP
1954-60
18.0%
1961-70
18.7%
1971-80
18.9%
Democratic plan, 1984-88
20.1%
5
DEMOCRATIC BUDGET PLAN TAX
INCREASE AND IMPACT ON
LOWER/MIDDLE INCOME FAMILIES
(BILLIONS OF $)
+ $100
+$74
+ $58
+ $48
+ $35
1984
1985
1986
1987
1988
HOUSE DEMOCRATIC BUDGET TAX INCREASE
IMPACT ON LOWER AND MIDDLE CLASS DUE TO
COMPARED TO CBO BASELINE
CANCELLING THIRD YEAR TAX CUT AND INDEXING
6
COMPARATIVE IMPACT OF RECENT TAX
REDUCTION MEASURES: HYPOCRISY OF
DEMOCRATIC FAIRNESS CLAIMS
(% OF TAX REDUCTION BY INCOME CLASS)
1978 CAPITAL GAINS REFORM AND
THIRD-YEAR TAX CUT AND
70 TO 50% RATE CUT
TAX INDEXING
(DEMOCRATIC PLAN PROPOSES NO CHANGES)
(DEMOCRATIC PLAN PROPOSES REPEAL)
35.5%
24.4%
50.0%
73.6%
$50,000-
200,000
$50,000-
200,000
2.0%
$200,000+
$200,000+
UNDER
$50,000
UNDER
$50,000
14.5%
7
IV. $181 BILLION DOMESTIC SPENDING SPREE
Democratic plan contains massive increase in non-defense outlays compared to President's
budget (billions).
1984
1985
1986
1987
1988
Total
+ 29
+ 33
+ 35
+40
+44
+ 181
Above spending explosion results in part from huge 1983-84 add-ons for pump-priming
appropriations after recession has ended. Compared to President's FY1983-84 budgets
(millions):
New make-work jobs
+ $9,550
Emergency jobs supplemental plus 1984 extension
+8,048
Increased housing funds
+ 18,292
New programs for unemployed, health benefits,
mortgage relief, science, research and math,
farm export aid and national development bank
+8,020
Increased revenue sharing
+ 1,700
Other appropriation add-ons
+ 12,171
Total, 1983-84 add-on
+ $57,781
8
For 27 domestic programs that have been cut considerably over past two years from excessive
Carter 1981 levels, Democratic plan adds $32 billion or 210% to President's FY1984 request - -
restoring these programs to 86% of 1981 peak funding levels (see chart).
1984 Administration request
$15.0
1984 Democratic budget plan
46.6
Democratic plan increase:
Amount
+$31.6
Percent
+210%
Permits runaway growth of entitlements spending to continue by repealing 1981-82 food stamp,
welfare and medicaid reforms and by rejecting all initiatives in President's FY1984 budget to
restrain growth of medical, Federal pension price-support and other entitlement programs.
These measures add $7.3 billion to FY1984 outlays and $81 billion over five years:
Entitlement Add-ons
1984
1985
1986
1987
1988
Total
(billions)
Add-on due to repeal of 1981-82
entitlement reforms
+1.6
+1.7
+2.1
+2.1
+2.1
+9.6
Add-on due to rejection of
proposed entitlement reforms
in FY1984 budget
+5.7
+10.3
+13.1
+ 18.8
+23.2
+71.1
Total add-on
+7.3
+ 12.0
+ 15.2
+ 20.9
+25.3
+80.7
9
Across-the-board program add-ons result in $114 billion increase over 1984-86 for major social
spending categories. Compared to President's budget for Function 450, 500, 550 and 600,
add-ons in House Democratic budget plan are as follows:
1984
1985
1986
1984-86 Total
Function
BA
Outlays
BA
Outlays
BA
Outlays
BA Outlays
(billions)
Community and Regional
Development (450)
+2.1
+1.2
+5.6 +3.2
+5.6 +3.9
+13.3 +8.3
Education, Training &
Social Service (500)
+13.6
+7.5
+8.3
+6.4
+9.0
+8.2
+ 30.9 +22.1
Health (550)
+4.2
+5.8
+3.6
+7.5
+5.1
+7.8
+ 12.9 +21.1
Income Security (600)
+24.5
+6.2
+18.5
+6.1
+ 13.8
+5.9
+56.8 + + 18.2
Total Social Program
Add-on
+44.4 +20.7
+36.0 +23.2
+33.5 +25.8
+113.9 +69.7
10
PUMP-PRIMING APPROPRIATIONS INCREASE IN
DEMOCRATIC PLAN, 1983-84
Appropriations Increases Over
President's Budget
(in millions of dollars)
Program
1983
1984
Total
*
1) American Conservation Corps
+60
- 1
+60
*
2) Farm Foreclosure Aid
+850
+850
+1,700
*
3) Mortgage Foreclosure Aid
+760
-
+760
*
4) Emergency Public Jobs
+4,950
+4,050
+9,000
5) Summer Youth Employment
+550
- 1
+550
*
6) Health Insurance for the Unemployed
+2,700
+2,700
+5,400
7) Low Income Weatherization
+200
+431
+631
8) Subsidized Housing
+1,579
+16,713
+18,292
9) Increased Revenue Sharing
+1,150
+550
+1,700
10) Emergency Jobs (HR 1718)
+4,898
+3,1502
+8,048
11) Economic Development Asst
-
+399
+399
12) Work Incentives (WIN)
-
+285
+285
13) Community Service Block Grant
-
+395
+395
14) Employment & Training Aid
-
+5,579¹
+5,579
15) Rural Housing Loans
-
+1,848 +
+1,848
16) SBA Direct Loans
-
+359
+359
17) Science & Research Initiative
-
+1,500
+1,500
* 18) National Industrial Bank
-
+100
+100
19) Farm Export Assistance
-
+800
+800
20) Excess Math & Science Funding
-
+375
+375
21) Grand Totals
+17,697
+40,084
+57,781
* = new program not contained in President's Budget.
'The Democratic Plan does not disaggregate its FY 1984 appropriations recommendation for employment &
training assistance; all 1984 amounts are identified in line 14.
²Increases not elsewhere recorded for programs granted appropriations increases for FY 1983 in H.R. 1718.
11
RESTORATION OF CARTER ADMINISTRATION
DOMESTIC FUNDING LEVELS
1984
Democratic
Program
1981
Budget
Plan
Add-on
1) Legal Services
321
-
296
+ 296
2) Energy Conservation Grants
430
-
431
+ 431
3) EDA
476
-
399
+ 399
4) Public Libraries
84
-
80
+ 80
5) Appalachian Development
85
-
75
+ 75
6) Juvenile Justice
100
-
73
+ 73
7) Health Planning
115
-
57
+ 57
8) Subsidized Housing
24,840
-2,319
14,394
+ 16,713
9) Employment & Training
7,574
4,281
8,925
+ 4,644
10) Compensatory Education
3,112
3,014
3,830
+ 816
11) REA Subsidized Loans
1,100
575
1,100
+ 525
12) DOE Energy R&D
2,719
2,566
3,232
+ 666
13) Low-income Energy Aid
1,850
1,300
2,250
+ 950
14) Vocational Rehabilitation
954
1,037
1,177
+ 140
15) Older American Act
986
898
1,003
+ 105
16) Mass Transit Operating Aid
1,105
275
875
+ 600
17) Postal Subsidies
1,343
400
879
+ 479
18) Land and Water Conservation Aid
319
65
257
+ 192
19) Agricultural Conservation Subsidies
222
56
212
+ 156
20) SBA Direct Loans
333
41
400
+ 359
21) Community Action Agencies
525
-
395
+ 395
22) Watershed Program
193
97
198
+ 101
23) NOAA Operations
776
816
958
+ 142
24) Education Block Grants
614
479
606
+ 127
25) Extension Service
304
287
340
+ 53
26) Historic Preservation
26
-
26
+26
27) Rural Housing
3,950
1,158
4,164
+ 3,006
28) Grand Totals
54,456
15,026
46,632
31,606
12
V. BUSINESS-AS-USUAL FOR NON-SOCIAL SECURITY TRANSFER
PAYMENTS: CONTINUED RAPID GROWTH AND $1.4 TRILLION IN FIVE
YEAR OUTLAYS
House Democratic budget proposes to allow uncontrolled entitlement spending growth to drive
deficits and total Federal spending to unprecedented levels. By repealing previous reforms and
rejecting all new Administration proposals to restrain growth of Federal pensions, medical
programs, farm price-supports and other entitlements, House Democratic plan results in $1.4
trillion in spending over five years.
This translates into 7.4% annual growth rate for these entitlements. Compared to their 1981 cost
of $152 billion, Democratic plan results in 37% higher cost in 1984 and 88% higher cost by 1988
for non-Social Security entitlements.
House Democratic Budget Plan
1984
1985
1986
1987
1988
Total
(billions)
Non-Social Security entitlement
outlays
$208
$222
$239
$261
$285
$1,415
Annual growth rate
4.2%
6.7%
7.7%
9.2%
9.2%
7.4%
Increase from 1981 level
+37%
+46%
+58%
+72%
+88%
n.a.
Part of this huge spending total results from proposed repeal of previously enacted food stamp,
medicaid and welfare reforms - resulting in:
$10 billion in lost savings over five years;
$4 billion food stamp add-on when rolls are declining due to recovery and documented $1
billion per year in erroneous payments;
13
Repeal of 1981 AFDC workfare reforms so that AFDC eligibility in all but three states will
extend to those with incomes in excess of full-time minimum wage job, and in some states
to families up to $14,000/year;
Restoration of reduced price school lunch eligibility to 190% of poverty line so that
$18,000 family would receive $250/year for each child in school lunch program.
Democratic plan results in entitlement spending growth rate 1.5 times higher than average
inflation assumed in CBO baseline for 1984-88 because the plan:
Rejects $24 billion in Medicare cost-savings proposed by Administration over 1984-88 -
leaving Medicare to grow at a 14.2% annual rate and resulting in Medicare outlays of $103
billion by 1988 compared to $53 billion as recently as 1983;
Rejects $16 billion in Administration-proposed Federal retirement reforms over 1984-88 -
despite half-trillion dollar unfunded liability in civil service fund; unaffordability of the most
generous annuity system in nation costing 35% of payroll; and $15 billion annual general
fund subsidy needed to keep system solvent;
Rejects $10.2 billion in Administration-proposed savings from farm target price freeze -
resulting in 1984-88 CCC outlays of $54.6 billion, an amount greater than total farm price
support costs from 1968 to 1981;
Rejects $10 billion over 1984-88 in proposed error rate reduction and other largely
administrative reforms in welfare and food stamp programs - despite ample
documentation of continued abuse;
Rejects $3.1 billion in five-year Medicaid reforms proposed by Administration - resulting in
cost growth from $14 billion in 1980 to $31 billion by 1988;
Includes $6.3 billion general fund bailout of railroad retirement system to maintain nearly
full benefits for "private pension" component of railroad retirement - a bailout available to
no other financially strained private pension system;
14
Includes new $1 billion/year Medicaid entitlement benefit (CHAP) for mothers' and
childrens' health and nutrition needs - despite $18 billion FY84 funding in existing
programs devoted to same purposes in Democratic plan. Funds already in 1984-86
Democratic budget for health and nutrition needs of mothers and children include:
1984-86 Funding in
Existing Program*
Democratic Plan
(billions)
WIC
$ 4.7
Food Stamps
16.7
Child Nutrition
10.6
Section 32 Food and Special Milk
1.2
Medicaid
20.5
Maternal & Child Health, Community
Health Centers & Child Immunization
3.2
Total, Existing Programs
$56.9
Proposed CHAP Entitlement Add-on
+ 1.9
*Includes only proportion of program outlays attributable to mothers and
children.
15
VI. RADICAL DEFENSE SPENDING CUT: $203 BILLION BUDGET AUTHORITY
REDUCTION OVER 1984-88 WOULD WIPE OUT ADMINISTRATION'S
DEFENSE REBUILDING PROGRAM AND PUT DEFENSE FUNDING BELOW
CARTER LEVELS
To pay for this reckless return to big spending as usual, the Democratic plan bases national
security funding on one-minute of computation by a hand-calculator. The proposed 4% real
growth per year for defense sounds significant. However, compared to actual defense needs
and the cost of meeting Soviet threats, as provided for in President's budget, a staggering
$206 billion reduction from the President's request would result from the Democratic plan:
1984
1985
1986
1987
1988
Total
(billions)
Defense authority cut from
President's request
- 16
-39
-47
-49
-54 -
- -206
Contrary to Democratic claims, the proposed draconian defense cut does not result in one dime
of deficit reduction. The entire proposed 1984-86 defense cut is reallocated to huge add-ons for
major social spending functions in the budget:
Change to
1984
1985
1986
1984-86 Total
President's Budget
BA
Outlays
BA
Outlays
BA
Outlays
BA Outlays
(billions)
Social spending functions
(450, 500, 550, 600)
+44
+9
+ 35
+23
+33
+26
+114
+69
.....
Defense function
- 16
- 10 -
-39 -26
-47
-37
-102 - 73
16
The Democratic plan results in defense funding level for 1984-86 that is below the inadequate
Carter five-year defense plan for 1982-86:
DEFENSE OUTLAYS, 1984-86
1984
1985
1986
Total
(billions)
Last Carter Budget
238
268
300
806
House Democratic Plan
235
256
284
775
Cut From Carter Budget
-3
- 12
- 16
-31
If this defense reduction is taken across-the-board, it would be necessary to -
de-activate one active and one reserve Army division; decommission one carrier battle
group and almost 30 other ships;
de-activate three Marine Corps fighter squadrons, two active and two reserve Air Force
tactical fighter wings and six continental U.S. air defense squadrons;
reduce readiness funds for spares and repairs, and combat funds for ammo, as well as
cancelling several major weapon systems for each service.
Or if funds for manpower, force operations and readiness are protected, a devastating one-third
reduction in our programs to modernize our forces and replace obsolete equipment would result -
forcing wholesale cancellation of major weapons systems such as:
the Air Force F-15 fighter aircraft, the Marine AV-8B aircraft, ASW helicopter, twenty-five
naval ships, the Army Bradley Fighting Vehicle and AH-64 attack helicopter, and the MX
Peacekeeper missile, effectively abandoning the land-based leg of our Strategic Triad.
17
ENTIRE DEMOCRATIC PLAN DEFENSE CUT
REALLOCATED TO MASSIVE INCREASE IN
SOCIAL SPENDING
1984-86 BUDGET AUTHORITY
1984-86 OUTLAYS COMPARED
COMPARED TO PRESIDENT'S BUDGET
TO PRESIDENT'S BUDGET
+ $114 BILLION
+
$69 BILLION
DEFENSE
DEFENSE
SOCIAL
SOCIAL
SPENDING*
SPENDING*
- $73 BILLION
$102 BILLION
*FUNCTIONS 450 (COMMUNITY AND REGIONAL DEVELOPMENT), 500 (EDUCATION, TRAINING,
EMPLOYMENT, AND SOCIAL SERVICES), 550 (HEALTH), AND 600 (INCOME SECURITY).
18
VII. THE DEMOCRATIC CLAIM THAT THEIR BIG DEFENSE CUTS AND MAJOR
TAX INCREASES ARE NEEDED TO CUT THE DEFICIT IS PHONY
Two out of every three dollars of combined revenue increases and defense reductions in the
proposed plan are allocated to increased domestic spending - not lower deficits.
Compared to the President's Budget:
1984-88
Combined tax increases and defense cuts
$277 billion
Higher domestic spending
+ 181 billion
Percent allocated to higher domestic spending
65%
19
TWO-THIRDS OF DEMOCRATIC PLAN'S*
TAX INCREASES AND DEFENSE CUTS GO
TO HUGE DOMESTIC SPENDING RISE
LESS
SECURITY
- $163 BILLION
SPENDING
$277
BILLION
HIGHER
$181 BILLION
DOMESTIC
SPENDING
HIGHER
+ $114 BILLION
TAXES
LOWER
- $96 BILLION
DEFICITS
*COMPARED TO ADMINISTRATION BUDGET
20
File
PRIVATE SECTOR SURVEY ON COST CONTROL IN THE FEDERAL GOVERNMENT
EXECUTIVE COMMITTEE
CHAIRMAN
J. Peter Grace
Chairman and CEO
W.R. Grace and Company
Grace Plaza
1114 Avenue of the Americas
New York, New York 10036
(212) 764-5411
MEMBERS
Joseph Alibrandi
President and CEO
Whittaker Corporation
10880 Wilshire Boulevard
Los Angeles, California 90024
(213) 475-9441
George Anderson
CEO
Anderson, ZurMuehlen and Co.
P.O. Box 1147
1 North Last Chance Gulch
Helena, Montana 59601
(406) 442-3540
Bennett Archambault
CEO
Stewart Warner Corporation
1826 Diversey Parkway
Chicago, Illinois 60614
(312) 883-7400
Robert A. Beck
Chairman and CEO
Prudential Life Insurance Company
Prudential Plaza
Newark, New Jersey 07101
(201) 877-7888
-2-
James Burke
Chairman and CEO
Johnson and Johnson
501 George Street
New Brunswick, New Jersey 08903
(201) 524-6331
Willard C. Butcher
Chairman
Chase Manhattan Bank
Chase Plaza
New York, New York 10081
(212) 552-7251
Russell G. Cleary
President and CEO
G. Heileman Brewery
100 Harborview Plaza
La Crosse, Wisconsin 54601
(608) 785-1000
William T. Coleman, Jr.
O'Melveny and Myers
1800 M Street, N.W.
Washington, D.C. 20036
(202) 457-5300
Carl D. Covitz
President
Landmark Communities, Inc.
9595 Wilshire Boulevard
Beverly Hills, California 90212
(213) 273-7320
Edward W. Duffy
Chairman and CEO
Marine Midland Bank
One Marine Midland Center
Buffalo, New York 14052
(716) 843-2424
Martin S. Feldstein
President
National Bureau of Economics Research
Harvard
Littauer Center, Room 119
Cambridge, Massachusetts 02138
(617) 495-4321
Edward S. Finkelstein
Chairman and CEO
Macy's
151 West 34th Street
New York, New York 10001
(212) 560-4455
-3-
John H. Filer
Chairman and CEO
Aetna Life and Casualty Company
151 Farmington Avenue
Hartford, Connecticut 06156
(213) 273-0123
Robert Galvin
Chairman and CEO
Motorola Corporation
1303 E. Algonquin Road
Schaumburg, Illinois 60196
(312) 576-5300
Clifton Garvin
CEO
Exxon Corporation
1251 Avenue of the Americas
New York, New York 10020
(212) 398-3000
Robert A. Georgine
President
Building and Trades Department
AFL-CIO
815 16th Street, N.W.
Washington, D.C. 20006
(202) 347-1461
William Graham
Chairman
Baxter Tavenol Labs, Inc.
1 Baxter Parkway
Deerfield, Illinois 60015
(312) 948-3000
Harry J. Gray
Chairman and CEO
United Technologies Corporation
United Technologies Building
Hartford, Connecticut 06101
(213) 728-7000
Maurice R. Greenberg
President & CEO
American International Group, Inc.
70 Pine Street
New York, New York 10270
(212) 770-7000
John W. Hanley
Chairman & CEO
Monsanto
800 North Lindbergh Boulevard
St. Louis, Missouri 63116
(314) 694-1000
-4-
Robert Hatfield
President
New York Hospital
633 3rd Avenue
New York, New York 10017
(212) 573-8131 or
(212) 472-6330
Philip Hawley
President & CEO
Carter Hawley Hale Stores, Inc.
550 South Flower Street
Los Angeles, California 90071
(213) 620-0150
Edward L. Hennessy, Jr.
Chairman, President, and CEO
Allied Chemical Corporation
P.O. Box 3000
Columbia Road and Park Avenue
Morristown, New Jersey 07960
(201) 455-2000
Stanley Hiller, Jr.
Chairman of the Executive Committee
Baker International Corporation
3000 Sand Hill Road
Menlo Park, California 94025
(415) 854-2212
Amory Houghton, Jr.
Chairman and CEO
Corning Glass Works
Corning, New York 14831
(607) 974-8479
Wilson Johnson
National Federation of Independent Businesses
150 West 20th Avenue
San Mateo, California 94403
(415) 341-7441
Donald R. Keough
Senior Executive Vice President
The Coca-Cola Company
P.O. Drawer 1734
Atlanta, Georgia 30301
(404) 898-2121
Jewel R. Lafontant (Mrs.)
Senior Partner
Lafontant, Wilkins and James
69 West Washington Street
Suite 1423
Chicago, Illinois 60602
(312) 263-4882
-5-
Arthur Levitt
President
American Stock Exchange
86 Trinity Place
New York, New York 10006
(212) 938-6000
Ben F. Love
CEO
Texas Commerce Bank
712 Main Street
Houston, Texas 77002
(713) 236-4865
Dan W. Lufkin
Chairman of Finance Committee
Columbia Pictures Industries Inc.
711 5th Avenue
New York, New York 10022
(212) 751-4400
William A. Marquard
Chairman, President, CEO
American Standard
40 West 40th Street
New York, New York 10018
(212) 840-5272
Donald B. Marron
Chairman and CEO
Paine Weber
140 Broadway
New York, New York 10005
(212) 437-2121
J.H. Tyler McConnell
Chairman and CEO
Delaware Trust Company
900 Market Street
Wilmington, Delaware 19899
(302) 421-7771
Roger Milliken
President and CEO
Milliken and Company
P.O. Box 3167
Spartanburg, South Carolina 29304
(803) 573-2020
Donald W. Nyrop
CEO
Northwest Airlines
Minnespolis-St. Paul International Airport
St. Paul, Minnesota 55111
(612) 726-2334
-6-
David Packard
Chairman of the Board
Hewlett Packard
1501 Page Mill Road
Palo Alto, California 94304
(415) 857-1501
Peter G. Peterson
Chairman and President
Lehman Brothers
One William Street
New York, New York 10004
(212) 558-1854
William Wood Prince, Sr.
President
F.H. Prince & Co.
One First National Plaza
Chicago, Illinois 60603
(312) 726-2232
John A. Puelicher
Chairman and President
Marshall and Isley Corporation
770 North Water Street
Milwaukee, Wisconsin 53201
(414) 765-7801
Francis Rooney
CEO
Melville Corporation
3000 Westchester Avenue
Harrison, New York 10528
(914) 253-8000
Eugene T. Rossides
Rogers and Wells
1666 K Street, N.W.
Washington, D.C. 20006
(202) 331-7760
George Scharffenberger
Chairman
City Investing Company
9100 Wilshire Boulevard
Beverly Hills, California 90212
(213) 278-2690
-7-
Nathan Shappell
Chairman
Shappell Industries
8383 Wilshire Boulevard
Beverly Hills, California 90211
(213) 655-7730
Richard R. Shinn
Chairman and CEO
Metropolitan Life Insurance Company
1 Madison Avenue
New York, New York 10010
(212) 578-2211
Forrest Shumway
CEO
The Signal Companies, Inc.
11255 North Torrey Pines
La Jolla, California 92037
(714) 457-3555
Barry F. Sullivan
Chairman and CEO
First National Bank of Chicago
One First National Plaza
Chicago, Illinois 60670
(312) 732-8048
Eugene Sullivan
Chairman & CEO
Borden Corporation
277 Park Avenue
New York, New York 10172
(212) 573-4176
Paul Thayer
Chairman
LTV Corporation
P.O.Box 225003
Dallas, Texas 75265
(214) 746-7711
Terry Townsend
CEO
Texas Motor Transportation Association
Box 1669
Austin, Texas 78767
(512) 478-2541
William L. Wearley
Chairman of Executive Committee
Ingersoll Rand Company
P.O. Box 636
Woodcliff Lakes, New Jersey 07675
(201) 573-3434
-8-
Luke G. Williams
CEO
American Sign and Indicator Company
N. 2310 Fancher
Spokane, Washington 99206
(509) 535-4101
COORDINATING OFFICE
DIRECTOR
James W. Nance
The White House
Washington, D.C. 20500
(202) 456-2393
DEPUTY DIRECTOR
Janet Colson
The White House
Washington, D.C. 20500
(202) 456-2393
FEDERAL BUDGET
Summary Data
Budget Summary
Tables A and B summarize (1) budget authority and outlays*
for the major departments and agencies for fiscal years
1981 through 1983, and (2) civilian employment for major
departments and agencies for fiscal years 1981-84.
Tables C and D provide budget and staffing information for
the independent and smaller agencies.
The President's 1983 Budget Message to the Congress is in-
cluded in The United States Budget in Brief, accompanying
this Briefing Book.
The 1983 Budget totals are:
Budget Receipts -- $666.1 billion
Budget Outlays -- $757.6 billion
Deficit
-- $ 91.5 billion
Note
*Budget authority is authority provided by law to enter into
obligations that will result in immediate or future outlays of
Government funds. Outlays are the amount of checks issued,
interest accrued on most public debt, or other payments, net
of refunds and reimbursements.
Table A. Summary of Budget Authority and Outlays
for Departments and Major Agencies
FY 1981-83.
(In millions of dollars.)
Budget authority
Outtays
Department or other with
1981
1982
1983
1981
1982
1983
actual
estimate
estimate
actual
estimate
estimate
Legislative branch
1,247
1,423
1,465
1,209
1,502
1,450
The Judiciary
653
741
842
637
730
824
Executive Office of the President
103
90
102
96
92
99
Funds appropriated to the President
14,662
11,036
11,483
7,010
6,370
6,936
Agriculture
28,169
30,251
24,748
26,034
29,442
23,533
Commerce 1
11,160
10,044
9,730
11,484
11,646
9,862
Defense-Military 3 $
178,386
214,060
257,469
156,096
182,800
215,900
Defense-Civil
3,097
2,918
2,292
3,148
2,991
2,286
Health and Human Services =
225,844
251,358
268,411
228,115
252,938
274,165
Housing and Urban Development
33,350
13,020
685
14,033
14,614
13,130
Interior 1 3
6,359
2,929
3,270
6,775
3,139
3,270
Justice 1 =
2,457
2,454
2,644
2,752
2,643
2,727
Labor
29,452
26,623
26,418
30,084
32,075
26,451
State
2,332
2,541
2,673
1,897
2,183
2,447
Transportation 4
23,710
20,300
18,438
22,509
20,567
18,980
Treasury 2
92,681
110,308
124,957
93,372
110,022
124,545
Environmental Protection Agency
3,025
3,674
3,590
5,241
5,434
4,644
National Aeronautics and Space Ad-
ministration
5,518
5,936
6,608
5,421
5,827
6,577
Veterans Administration
23,133
24,754
25,621
22,904
24,134
24,356
Other independent agencies 1 2
63,383
63,114
53,181
48,706
48,306
40,187
Allowances &
-608
-1,243
-624
-1,257
Undistributed offsetting receipts:
Employer share, employee retire-
ment
-6,371
-7,560
-8,353
-6,371
-7,560
-8,353
Interest received by trust funds
-13,810
-16,080
-16,122
-13,810
-16,080
-16,122
Rents and royalties on the Outer
Continental Shelf lands
-10,138
-7,861
-18,000
-10,1384
-7,861
-18,000
Federal surplus property disposition
-1,000
-1,000
Total budget authority and
outlays
718,400
765,646
801,910
657,204
725,331
757,638
MEMORANDUM
Portion available through current
action by Congress
437,841
446,859
461,125
274,380
300,333
309,132
Portion available without current
action by Congress
379,425
434,957
475,787
289,644
340,338
387,036
Outlays from obligated balances 6
140,506
155,481
165,530
Outlays from unobligated balances .
51,540
45,531
30,942
Deductions for offsetting receipts:
Intragovernmental transactions
-66,377
-81,787
-86,737
-66,377
-81,787
-86,737
Proprietary receipts from the public
-32,490
-34,565
-47,265
-32,490
-34,565
-47,265
Total budget authority and
outlays
718,400
765,464
802,910
657,204
725,331
757,638
, The buget proposes dismantiement of the Department of Energy (DOE). effective October 1. 1982. Budget data for activities previously
performed by DOE are included in the agencies that are proposed to assume these activities.
*The budget proposes dismantiement of the Department of Education (DEd). effective October 1. 1982. Budget data for activities previously
performed by DEd are included in the agencies that are proposed to assume these responsibilities
3 Includes allowances for civilian and military pay raises for Department of Defense.
includes allowance for military pay raises for the Coast Guard
& includes allowances for civilian agency pay raises and contingencies
Outlays from appropriations to liquidate contract authority are included as outlays from balances
Table B. Summary of Civilian Employment*
for Departments and Major Agencies
FY 1981-84.
(Excluding the Postal Service)
Fiscal year
1981
1982 revised
1982 current
estimate*
Budget
1923 estimate
1984 estimate
estimate -
estimate
Agriculture
117,300
121,000
117,000
111,000
108,900
Commerce 4 5
52,600
45,500
45,600
40,500
38,200
Defense-civil functions
34,400
32,300
32,300
30,700
29,100
Health and Human Services 6
148,400
154,400
147,600
141,400
137,600
Housing and Urban Development
16,100
15,700
14,900
14,400
14,100
Interior 5 .
85,900
87,400
85,000
81,600
79,300
Justice s 5
56,900
55,100
56,400
55,800
54,400
Labor
22,600
21,600
19,200
18,600
18,400
State
23,400
22,900
23,000
23,300
23,500
Transportation 4
58,800
69,300
60,100
61,900
62,500
Treasury 6
123,900
124,400
122,200
123,000
122,200
Environmental Protection Agency
12,700
12,900
12,200
10,500
10,500
National Aeronautics and Space Administra-
tion
22,600
22,700
22,500
22,000
22,000
Veterans Administration
214,100
209,600
215,900
216,800
218,900
Other:
Foundation for Education Assistance 6
6,200
5,300
5,400
4,800
4,800
General Services Administration
34,000
32,800
32,300
31,000
29,500
International Communication Agency 6
7,900
7,600
7,900
7,900
7,900
International Development Cooperation
Agency
5,800
5,800
5,700
5,600
5,400
Nuclear Regulatory Commission
3,400
3,400
3,400
3,400
3,300
Office of Personnel Management
7,200
6,600
6,400
5,900
5,800
Panama Canal Commission
8,900
9,100
9,000
9,000
9,000
Small Business Administration
5,000
4,700
4,500
4,200
4,100
Tennessee Valley Authority
50,100
44,800
42,500
41,400
40,300
Miscellaneous 5 .
45,500
47,200
43,100
40,700
39,900
Undistributed reduction
-2,500
Subtotal
1,163,700
1,162,100
1,134,100
1,105,400
1,087,100
Defense-military functions 6 ,
947,000
937,700
945,200
947,300
947,000
Subtotal
2,110,700
2,099,800
2,079,300
2,052,700
2,034,100
Contingencies 8
1,000
1,000
1,000
1,000
Total
2,110,700
2,100,800
2,080,300
2,053,700
2,035,100
$ Excludes developmental positions under the worker-trainee opportunity program (WTOP) as well as certain statutory exemptions
# Data are estimated because most executive branch agencies were not reporting full-time equivalent (FTE) information prior to October 1981.
a As contained in the revised 1982 Budget. transmitted to the Congress in March 1981.
Reflects the transfer. during 1981. of the Maritime Administration from the Department of Commerce to the Department of Transportation
8 The budget proposes dismantiement of the Department of Energy (DOE). effective October 1. 1982. Employment data for activities previously
performed by DOE are included in the agencies that are proposed to assume these activities.
The budget proposes dismantiement of the Department of Education (DEd). effective October 1. 1982 Employment data for activities
previously performed by DEd are included in the agencies that are proposed to assume these responsibilities
, Section 904 of the 1982 Defense Authorization Act (Public Law 97-86) exempts the Department of Defense from full-time equivalent
employment controls
. Subject to later distribution.
*
Full-time Equivalent of Total Employment.
Table C. Independent Agencies Outlays of Federal
Funds. ($ in thousands.)
81
82 est.
83 est.
ACTION
150,310
132,637
119,354
ADM. CONF. OF U.S.
1,132
1,017
1,299
AM. BATTLE MONU COMM.
8,081
10,419
10,584
ARMS CONTROL & DISARM. AGENCY
15,888
15,716
17,964
BD. FOR INT'L BROADCASTING
88,199
86,892
95,305
CIA
55,300
84,600
91,300
CAR
147,151
112,590
76,877
COM. ON FINE ARTS
305
291
319
COM. ON. CIVIL RIGHTS
12,137
11,900
11,700
COMMODITY FUTURES TRADING COMM.
18,298
19,526
22,539
CSA
618,668
184,574
32,572
CPSC
40,885
34,354
32,170
CORP. FOR PUBLIC BROADCASTING
162,000
172,000
137,000
F.E.OC
134,256
143,000
141,947
EX-IM BANK OF THE U.S.
2,066,222
1,854,641
1,917,853
FARM CREDIT ADMIN.
502
870
FCC
80,919
76,191
73,625
FDIC
-1,725,994
-1,800,000
-2,000,000
FED. ELECTION COMM.
9,239
8,320
9,491
FEMA
372,135
416,693
585,332
FED. HOME LOAN BANK BOARD
369,931
38,423
-149,970
FED. LABOR RELATIONS AUTH.
15,552
14,203
15,745
FED. MARITIME COMMISSION
11,704
11,017
10,274
FED. MEDIATION & CONCILIATION
24,327
24,697
21,012
SERVICE
FED. MINE SAFETY & HEALTH
3,706
3,244
3,649
REVIEW COMM.
FTC
70,082
68,046
61,098
GSA
186,037
258,235
-528,389
INDIAN CLAIMS COMI.
INTELLIGENCE COMMUNITY STAFF
14,005
15,676
3,736
ACIR
1,917
1,850
1,900
ARC
5,270
2,900
39
WASH. METRO AREA TRANSIT AUTH.
69,207
80,546
68,748
INT'L COMMUNICATION AGENCY
462,813
523,370
567,586
INT'L TRADE COMMISSION
16,193
19,080
19,737
ICC
74,190
33,463
56,278
LEGAL SERVICES CORP.
324,314
147,605
12,836
MS.PB
20,569
22,216
20,552
NAT. CAP. PLNG. COMM.
2,339
2,267
2,202
NAT. CONSUMER COOP. BANK
131,491
85,705
-
NCUA
-10,256
93,471
104,409
NAT. FOUND. ON THE ARTS
302,176
288,048
278,906
AND HUMANITIES
NLRB
114,450
113,815
131,333
NAT. MEDIATION BOARD
4,289
4,503
3,915
NSF
973,412
1,095,995
976,760
NAT. TRANSP. SAFETY BD.
18,296
16,894
17,294
NEIGHBORHOOD REINVEST. CORP.
12,459
13,872
15,512
NRC
416,844
446,500
450,500
OCCUP. SAFETY & HEALTH REV.
7,654
7,103
6,363
COMM.
FED. INSPECTOR--ALASKA
16,009
26,050
28,901
PIPELINE
OPM
14,483,241
15,446,916
16,504,466
PANAMA CANAL COMM.
-17,606
-2,450
-20,502
PA. AVE. DEV. CORP.
35,112
32,213
17,130
POSTAL SERVICE
1,343,217
619,240
500,000
RAILROAD RETIREMENT BD.
342,218
379,466
350,266
RENEGOTIATION BD.
SEC
78,025
81,591
83,922
SELECTIVE SERVICE SYST.
27,029
20,420
23,559
SBA
1,912,527
525,445
78,200
SMITHSONIAN INSTITUTION
166,762
188,198
198,748
TVA
1,927,758
2,179,976
1,689,976
U.S. METRIC BD.
2,546
2,464
200
U.S. RAILWAY ASSOC
191,250
28,000
3,000
WATER RESOURCES COUNCIL
22,912
5,967
1,014
Table D. Independent Agencies Staffing Levels.
Total
Total
Total
81 FTE
82 FTE
83 FTE
ACTION
1,179
912
558
Adm. Conf. of U.S.
21
25
25
American Battle Monuments Comm.
379
387
387
Arms Control & Disarm. Agency
187
190
178
Bd. for Int'l Broadcasting
10
10
10
CIA
--
--
--
CAB
710
570
499
Comm. on Fine Arts
7
4
4
Comm. on Civil Rights
267
262
237
Commodity Futures Trading Comm.
476
483
523
CSA
1,018
0
0
CPSC
811
649
636
Corp. for Public Broadcasting
--
--
--
EEOC
3,358
3,376
3,327
Ex-IM Bank of the U.S.
374
360
344
Farm Credit Administration
261
307
310
FCC
2,130
1,986
1,587
FDIC
3,313
3,287
3,287
Fed. Election Commission
248
236
236
FEMA
2,375
2,340
2,540
Fed. Home Loan Bank Board
1,510
1,555
1,555
Federal Labor Relations Authority
363
328
316
Federal Maritime Commission
297
301
278
Fed. Mediation & Conciliation Serv.
492
408
363
Fed. Mine Safety & Health Review Comm.
81
76
70
FTC
1,671
1,455
1,310
GSA
34,034
32,267
31,012
Indian Claims Commission
--
--
--
Intelligence Community Staff
--
--
--
ACIR
38
45
45
ARC
5
6
0
--
--
--
Wash. Metro. Area Transit Auth.
7,891
7,882
7,882
Int'l Communication Agency
432
441
440
Int'l Trade Commission
1,852
1,620
1,475
ICC
--
--
--
Legal Services Corp.
460
505
495
MSPB
56
54
52
Nat. Cap. Planning Comm.
--
--
--
Nat. Consumer Coop. Bank
706
698
672
NCUA
590
557
536
Nat. Found. on the Arts & Hum.
2,828
2,680
3,050
NLRB
62
62
60
Nat. Mediation Board
1,315
1,303
1,238
NSF
370
345
315
Nat. Transp. Safety Bd.
--
--
--
Neighborhood Reinvest. Corp.
3,423
3,448
3,362
NRC
168
135
121
Occup. Safety & Health Rev. Comm.
158
200
217
Fed. Inspector--Alaska Pipeline
7,164
6,358
5,901
OPM
8,903
9,042
8,962
Panama Canal Commission
55
42
39
Pa. Ave. Dev. Corp.
641,632
641,266
635,605
Postal Service
1,620
1,578
0
Railroad Retirement Bd.
--
--
--
Renegotiation Bd..
1,982
1,920
1,795
SEC
141
253
266
Selective Service System
5,012
4,516
4,223
SBA
4,336
4,324
4,324
Smithsonian Inst.
50,087
42,473
41,373
TVA
40
25
0
U.S. Metric Bd.
--
--
--
U.S. Railway Assoc.
35
23
0
Water Resources Council
THE PRESIDENT'S PRIVATE SECTOR SURVEY
ON
EFFICIENCY AND COST CONTROL
EXECUTIVE
GOVERNMENT
COMMITTEE
LIAISON GROUP
OMB
J. PETER GRACE
- A/S MGT. GROUP
CHAIRMAN
- IG GROUP
SELECTED
AGENCIES
THE COORDINATING OFFICE
THE COORDINATOR
STAFF DIRECTOR
OMB LIAISON
2-3 STAFF (ADMIN.,
LEGAL, ETC.)
PROJECT LIAISON OFFICERS
PROJECT
PROJECT
PROJECT
PROJECT
TEAMS
TEAMS
TEAMS
TEAMS
OTHER
DOD
HHS
HUD
DEPART-
CROSS-
MENTS AND
CUTTING
AGENCIES
PROJECT
TEAMS
THE WHITE HOUSE
WASHINGTON
June 22, 1983
MEMORANDUM FOR MORTON BLACKWELL
FROM:
JOHN H. ROUSSELOT CAMR
Ken,
SUBJECT:
Talking Points on the Budget
Take
to
mw
Could use your help today in calling your Public Liaison
P
contacts who are willing to make direct contact with the
Hill re: the attached talking points on the budget. The
President is very much opposed to this budget. We need
their help today in calling Senators and Congressmen.
it Kingston
Thank you for your help and cooperation.
Friday.
MB
MAJOR PROBLEMS WITH BUDGET CONFERENCE AGREEMENT
I. The Administration strongly opposes the Conference
Agreement on the Budget Resolution. Adoption of the
agreement would reverse the fiscal priorites of the
Reagan Administration. The Conference Agreement would:
O Allow for dramatic increases in domestic spending,
including several billion for unnecessary new spending
programs;
Finance these domestic spending increases by raising
taxes, drastic cuts in defense, and increasing the
FY84 deficit; and
Unnecessarily jeopardize the progress of the economic
recovery now underway.
II. The Conference Agreement Increases Revenues by More Than
a Third More Than the President's Budget.
1984
1985
1986
Total
President April*.
+2.6
+5.4
+48.4
+56.4
Resolution
+12.0
+15.0
+46.0
+73.0
*as submitted
III. The Conference Agreement Includes a Defense Growth Rate
Less Than Half That Proposed by the President for FY84
and FY85.
Cut From President's
January Request*
1984
1985
1986
Total
Budget Authority.
-11.9
-32.7
-35.8
-80.4
O
Outlays
-5.3
-20.0
-28.0
-53.3
*as submitted
Real Growth*:
o
President
10.2%
10.4%
4.5%
--
o
Resolution
4.7%
4.9%
5.0%
--
*Based on CBO deflators with varying pay assumptions
IV. Agreement Actually Increases Spending for Existing
Non-Defense Programs (Excluding Interest) Instead of
Decreasing It.
1984
1985
1986
Total
CBO Baseline
511.2
536.7
565.3
1,613.2
President
-13.4
-21.4
-28.1
-62.9
Resolution
+1.2
+1.7
-2.9
+0.0
V. In Addition, Agreement Includes A $16 Billion Dollar
Reserve Fund (excluding interest) for Unnecessary New
Domestic Programs
Total
1983
1984
1985
1986
FY84-86
Budget Authority
+6.0
+8.3
+4.8
+3.0
+16.1
Outlays
+5.4
+8.5
+3.4
+2.0
+13.9
Reserve Fund Spending Items:
$4 billion public jobs bill
Industrial Development Bank
Health Benefits for the Unemployed
Mortgage Bailout
FSC Extension
Agricultural Credit Relief
Infrastructure Initiative
Food Stamps
Veterans Employment Initiative
VI. In Total, Conference Agreement Proposes to Increase
Domestic Spending (Excluding Interest) Over the
President's Request by $23.1 Billion in FY84 and $76.8
Billion FY84-86.
1984
1985
1986
Total
O
Domestic
Over Request
+23.1
+26.5
+27.2
+76.8
VII. Almost 70 Percent of the Increase in Domestic Spending
FY84-86 Would be Financed by Cutting Defense Spending
O
Defense spending would be cut below the last Carter
Budget.
1984
1985
1986
Total
O Resolution
240.0
265.3
295.0
800.3
O Carter
237.8
267.8
299.5
805.1
O Difference
...
+2.2
-2.5
-4.5
-4.8
June 22, 1983 2:45 PM
MAJOR PROBLEMS WITH BUDGET CONFERENCE AGREEMENT
I. The Administration strongly opposes the Conference
Agreement on the Budget Resolution. Adoption of the
agreement would reverse the fiscal priorites of the
Reagan Administration. The Conference Agreement would:
o Allow for dramatic increases in domestic spending,
including several billion for unnecessary new spending
programs;
Finance these domestic spending increases by raising
taxes, drastic cuts in defense, and increasing the
FY84 deficit; and
Unnecessarily jeopardize the progress of the economic
recovery now underway.
II. The Conference Agreement Increases Revenues by More Than
a Third More Than the President's Budget.
1984
1985
1986
Total
President April*.
+2.6
+5.4
+48.4
+56.4
Resolution
+12.0
+15.0
+46.0
+73.0
*as submitted
III. The Conference Agreement Includes a Defense Growth Rate
Less Than Half That Proposed by the President for FY84
and FY85.
Cut From President's
January Request* :
1984
1985
1986
Total
Budget Authority.
-11.9
-32.7
-35.8
-80.4
Outlays
-5.3
-20.0
-28.0
-53.3
*as submitted
Real Growth*:
President
10.2%
10.4%
4.5%
--
Resolution
4.7%
4.9%
5.0%
--
*Based on CBO deflators with varying pay assumptions
IV. Agreement Actually Increases Spending for Existing
Non-Defense Programs (Excluding Interest) Instead of
Decreasing It.
1984
1985
1986
Total
CBO Baseline
511.2
536.7
565.3
1,613.2
President
-13.4
-21.4
-28.1
-62.9
Resolution
+1.2
+1.7
-2.9
+0.0
V. In Addition, Agreement Includes A $16 Billion Dollar
Reserve Fund (excluding interest) for Unnecessary New
Domestic Programs
Total
1983
1984
1985
1986
FY84-86
Budget Authority.
+6.0
+8.3
+4.8
+3.0
+16.1
Outlays
+5.4
+8.5
+3.4
+2.0
+13.9
Reserve Fund Spending Items:
$4 billion public jobs bill
Industrial Development Bank
Health Benefits for the Unemployed
Mortgage Bailout
FSC Extension
Agricultural Credit Relief
Infrastructure Initiative
Food Stamps
Veterans Employment Initiative
VI. In Total, Conference Agreement Proposes to Increase
Domestic Spending (Excluding Interest) Over the
President's Request by $23.1 Billion in FY84 and $76.8
Billion FY84-86.
1984
1985
1986
Total
o
Domestic
Over Request
....
+23.1 +26.5 +27.2
+76.8
VII. Almost 70 Percent of the Increase in Domestic Spending
FY84-86 Would be Financed by Cutting Defense Spending
O
Defense spending would be cut below the last Carter
Budget.
1984
1985
1986
Total
O Resolution
240.0
265.3
295.0
800.3
0 Carter
237.8
267.8
299.5
805.1
O Difference
+2.2
-2.5
-4.5
-4.8
June 22, 1983 2:45 PM