Government Executive - Authors - Ben Wildavsky

Social Security's Success Story

Ben Wildavsky — Mon, 22 Jun 1998 00:00:00 -0400

Didn't anybody see the Year 2000 bug coming? The Social Security Administration did. It has consistently received higher marks than any other government agency for its handling of the problem, earning an A+ in a June congressional report card. To learn why, National Journal recently spoke with the assistant deputy commissioner for systems, Kathleen M. Adams, who heads up the agency's Year 2000 efforts. Some edited excerpts:

Q: When did you first hear about the Year 2000 problem?

A: In 1989, the Social Security Administration had a system that experienced a problem because of the Year 2000 [bug], a system that tracked overpayments. At the end of '89, someone tried to set up a repayment schedule that went beyond 2000, and the system couldn't process it. I remember we said, "Whoa, that means other stuff is going to start breaking." You have to remember, no one was talking about this back then. There were no tools. We had to go through and see how many date instances we had in our code, and see if those calculations could handle 00 dates. We found our code was very date-intensive. If you think about what we do, we keep track of important things in your life: When you were married, when you were born, when you had kids and how old they are, how much money you earned in what years. And we came to the conclusion that this was going to be big, that we were going to have to literally look at every piece of software and fix it.

Q: How did you win people over to tackle this problem?

A: I don't remember ever having to convince anybody that this was important. In my talks with a lot of private-sector firms, CIOs [chief information officers] had a lot of difficulty persuading CEOs that this was something you had to spend money on. In this agency, we are very dependent on automation. You cannot manually generate 50 million payments a month. When you tell the leadership across the agency that there's a threat to those systems' working properly unless we make sure they work beyond the year 2000, nobody says, "I don't think I want to do that." We pride ourselves on being very customer-focused. Fifty million payments are made to 43 million people every month. Guess who those people are? My mother is one. We all joke here about how we can't mess up, because we don't want to mess up Mom.

Q: What lessons can be drawn from your experience?

A: I think what a lot of folks are learning is that your systems portfolio is an asset. You can't say, "I don't want to spend money on that, I'd rather spend money on flowers." If Year 2000 teaches anything, it is that there is an information-technology infrastructure in this country, just like we have an infrastructure of roads, and from time to time, they have to be repaved.

Q: Have you won any awards for your Year 2000 work?

A: As I remind everybody, I'm very grateful for the A+, but the only grade that really matters is the final. The final exam will be whether the lights and everything go on when we open for business on Jan.1, 2000.

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Looming Liabilities

Ben Wildavsky — Tue, 20 Jan 1998 00:00:00 -0500

How shall we spend the federal budget surplus? For months, lawmakers have been all too happy to count the ways. And after President Clinton's Jan. 5 announcement that he'll submit a balanced budget to Congress for the 1999 fiscal year, White House officials began publicly declaring a new era of fiscal bounty as well. "You'll see surpluses as far as the eye can see," enthused National Economic Council director Gene B. Sperling.

But even as the Administration prepares to roll out its February budget blueprint -- which will propose additional health care coverage for early retirees and a variety of other initiatives -- and Republicans meanwhile feud over whether to cut taxes, reduce the federal debt or build more roads, there are plenty of long-term fiscal burdens to address.

The best-known of these are the major entitlement programs for the elderly, Medicare and Social Security, whose costs will start exploding in the second decade of the 21st century, after the massive baby boom generation begins retiring. Republicans and Democrats alike are talking a good game about putting these programs on a sounder financial footing: Last year's balanced budget deal established a bipartisan commission on the future of Medicare, and Clinton says he wants to establish a plan to fix Social Security before he leaves office.

But fiscal experts say the federal government faces many other, less-discussed financial commitments in the future. These include bank deposit insurance, private pension insurance and a huge portfolio of guaranteed loans, all of which have some risk of going sour and costing the government substantial sums down the road. Then there's the cost of cleaning up contaminated nuclear waste sites overseen by the Energy Department -- not to mention hefty pension and health care expenses for current and future federal retirees. In March, the first-ever set of audited financial statements for the federal government will spell many of these out.

Budget mavens warn that the same budget practices that have masked our entitlement woes and permitted lawmakers to put off corrective action could also lead to unpleasant surprises where these other long-term expenses are concerned. Their message: It's time to take off those dancing shoes, stop the budget surplus party and start planning for the future. In other words -- to rephrase a famous economist's line -- without more careful budgeting today, in the long run we'll all be in the red.

The fundamental barrier to taking future government costs into account in the present is that many looming liabilities or other financial commitments simply aren't counted in the year-to- year budget process. "The budget is generally a short-term, cash-based spending plan focusing on the short- to medium-term cash implications of government obligations and fiscal decisions," observes an October 1997 report prepared for the Senate and House Budget Committees by the General Accounting Office (GAO). "Accordingly, it does not provide all of the information on the longer-term cost implications stemming from the government's commitments when they are made."

Alarm Bells

Simply put, says Donald F. Kettl, director of the LaFollette Institute of Public Affairs at the University of Wisconsin (Madison), "as long as the budget system focuses on the current deficit or surplus and you have a system where you only keep track of what you spend today, any expenditure you can put off until next year instead of spending this year is something that doesn't count in budgetary terms."

That explains why Social Security looks like a cash cow in the short term: Payroll taxes from the large generation of current workers provide far more money than is needed to finance benefits for today's retirees; the extra money is used for other government programs. The latest budget projections from the Congressional Budget Office (CBO), for instance, show a surplus of $14 billion in 2001, but only because they count the $130 billion in surplus Social Security revenues that will come in that year. In the future, however, the situation will be reversed, with too few workers paying for many more retirees -- and, unless current spending patterns change, no money from past years set aside to help with the costs.

While budget analysts generally agree that upcoming Social Security and Medicare costs pose the primary threat to the federal government's long-term solvency, federal insurance programs provide another example of the way substantial future costs can be masked by current accounting methods. These programs include bank deposit insurance, national flood insurance, federal crop insurance, pension insurance provided through the Pension Benefit Guaranty Corporation (PBGC), and a range of others that added up to almost $5 trillion in insurance commitments in fiscal year 1995. That doesn't mean the federal government is on the hook for the full $5 trillion, more than half of which represents insured deposits at financial institutions, but some portion of the total is at risk.

The yearly premiums collected for these programs often don't jibe with their likely future costs, the GAO noted in a September 1997 report on how to budget for federal insurance programs. From 1981-92, for instance, the PBGC reported positive net cash flows each year, even though its accumulated deficit grew from $190 million to $2.4 billion. "Thus, PBGC appeared financially sound in the cash-based budget despite its deteriorating condition," the GAO said. Similarly, the flood insurance program showed premiums outstripping claim payments in six of 10 years between 1986 and 1995. "This made the program appear [to be] in good financial shape, even though a significant portion of the policies receive an unfunded subsidy and the program has not been able to build sufficient reserves to cover expected future high-loss years," the report said.

Probably the favorite cautionary tale cited by advocates for changing the cash-budgeting status quo is the savings and loan crisis of the 1980s. The GAO all but says "I told you so" when recounting the S&L disaster. It notes that "GAO and some industry analysts" sounded the alarm bells about the rising costs to the government of deposit insurance, but that little was done as the situation worsened. "The cash-based budget provided little incentive to address the growing problem, because it did not recognize the costs until institutions were closed and depositors paid," the report says.

The GAO recommends that federal budgeteers begin developing methods of making current cost estimates for these programs based on expected future costs, or moving in the direction of accrual-based budgeting. It acknowledges that estimating future risks is difficult. But it says federal policy makers would make better decisions about entering into long-term commitments if they had better information up-front about future liabilities.

"If we took some of those insurance programs and put them outside the budget, we would show a bigger deficit rather than a budget that's almost in balance," said CBO analyst Marvin Phaup. "The question is whether or not the Congress would react to the bigger deficit by changing policies in ways that they wouldn't change them if they see that we have a surplus." He says the answer is probably yes. "If we have a surplus or balance, I believe there's tremendous pressure on the Congress to increase spending. If we show a bigger deficit or a budget that's barely in balance, those pressures can be abated."

The quasi-governmental organizations known as government- sponsored enterprises, or GSEs, provide still another example of what Kettl has called "the budgetary twilight zone." A recent study for the libertarian Cato Institute calls the two largest GSEs -- Fannie Mae, the home-financing company; and Freddie Mac, the Federal Home Loan Mortgage Corp. -- "financial time bombs." These two GSEs, which buy mortgages from lenders, package them into securities and then resell them to investors, don't receive taxpayer funds directly. But the study contends that the implicit federal guarantee behind the GSEs exposes taxpayers to "potential contingent liability that could ultimately cost tens of billions of dollars to rectify" should a bailout ever be required.

Costly Surprises

In March, there may be a good deal more attention paid to the government's long-term costs. That's when the first-ever set of audited financial statements for the federal government will be issued, as mandated by the Government Management Reform Act of 1994. The federal balance sheet for fiscal year 1997 will cover such items as Energy Department estimates for cleaning up its contaminated nuclear waste sites, which were pegged in last year's unaudited financial statements, covering fiscal year 1996, at $229 billion. It will also include actuarial estimates for unfunded health costs for military and other federal retirees, which were estimated at $344 billion in last year's statements. And it will look at the costs of civil and military pensions owed to current and future retirees, which the 1996 actuarial estimates placed at some $1.6 trillion.

In the meantime, the GAO is continuing its work on long- term budget costs, looking at everything from entitlements, federal pensions and railroad retirement benefits to insurance programs, environmental cleanup, and deferred maintenance and life-cycle costs for equipment and infrastructure. "We know we're faced with long-term costs, and they don't show up in our budget numbers that well," said Paul L. Posner, the GAO's director of budget issues. "The challenge is: How do we make those long-term costs more immediately understandable and compelling to people in the short term?"

The latest GAO work was requested by House Budget Committee chairman John R. Kasich, R-Ohio, who's taken a particular interest in future liabilities.

"We not only have a $5.5 trillion national debt, but we also have about $14 trillion in unfunded liabilities related to Medicare and Social Security that doesn't even appear on the books," Kasich said at an October Budget Committee session he convened to discuss the post-balanced-budget era. Kasich reaches the arresting $14 trillion total by using projections of the unfunded liability for Social Security's old-age, survivors and disability funds and Medicare's hospital insurance program over the next 75 years. Budget analysts note that the use of the term "liabilities" is imprecise, because Congress can rewrite entitlement laws to change its future commitments, as it did when it overhauled Social Security in 1983. Still, Kasich's fundamental point is certainly correct: The government faces sobering future costs.

"There's an almost instinctive sense here that if people start thinking there are surpluses, it's going to reduce the desire to restrain spending," said a Republican Budget Committee aide. "If we begin to see that these long-term commitments are unmanageable, it may force us... to undertake more-efficient ways" of dealing with problems such as environmental cleanups. "In a sense, we may be making commitments now that we're never going to be able to keep."

Wrong Assumptions

One notable exception to the problem of insufficiently reflecting future costs in today's budgets is the Credit Reform Act of 1990. In the past, federal budgeteers could record direct federal loans and guarantees -- used for everything from housing and education to aid to farmers and small businesses -- on a yearly cash-flow basis. That created various perverse financial incentives, because loan guarantees didn't appear to "cost" the government anything in the short term, even though some guaranteed loans ultimately default. What's more, direct loans seemed more expensive than they really were because cash-based budget methods didn't take into account that many direct loans are paid back. The 1990 legislation required the government to estimate how much money it was likely to lose in the future on its loans and guarantees and to budget each year for those expected losses.

The result, according to Phaup and his CBO colleague David Torregrosa, is that lawmakers now have a much greater inducement to look at the long-term costs of these programs. "Single-year cash flows are now seen as irrelevant, while cash flows over the life of the credit contract are properly regarded as the key component of cost," they write in a chapter of a book due out later this year, The Handbook of Government Budgeting.

Nevertheless, despite the changes that credit reform made, some budget-watchers worry that serious risks to federal coffers remain. "In theory, loan guarantees could be the biggest reason the federal budget goes bust," said fiscal expert Stanley E. Collender, who works in the Washington office of the New York City-based public affairs firm Burson-Marsteller.

Under credit reform, the federal budget must reflect what's known as the "net present value" of loan subsidies based on a calculation of the risk of default. Nevertheless, Collender said, "budget assumptions are notoriously wrong." He said, for example, that a large number of student loans could go belly-up unexpectedly -- and very expensively.

Some long-term costs aren't really unexpected but could, nevertheless, strain resources at a time when the government needs every penny it has. The Center on Budget and Policy Priorities harshly criticized last year's tax bill because of the "sharply escalating costs" over the next 20 years of the cuts it made in the estate tax, the capital gains tax and the corporate alternative minimum tax. Robert Greenstein, the group's director, said in an interview that he's worried Congress may pass another tax bill this year, sidestepping pay-as-you-go budget rules on the grounds that a budget surplus is in the works. "We could end up with another backloaded tax bill that has very large costs in the years the boomers start retiring," he said.

The unexpected economic growth and revenue surges of recent years lead some analysts to conclude that the long-term fiscal picture is unlikely to be unremittingly gloomy. "I would agree with the idea that people are being a bit myopic," said budget scholar Roy T. Meyers, a political science professor at the University of Maryland (Baltimore County). "In the past, there certainly have been some very costly surprises," he said, citing the huge price tag of the savings and loan bailout. On the other hand, added Meyers, a former CBO analyst and editor of the forthcoming government budgeting handbook: "If you look at the 1980s, there were actually some great surprises which actually reduced costs -- particularly with the breakup of the Soviet Union. Most of the discretionary spending savings since the late 1980s have been there" because of reduced defense outlays. In other words, just as fiscal bad news can be hard to predict, so can fiscal good news. "It's conceivable to me that, yes, although there might be some very costly surprises, there might also be some additional surprises in terms of reducing spending obligations," Meyers said. "It's important to keep that in mind."

There's no question that budget predictions are imperfect. Plus, there are many good reasons not to treat the federal government's accounts the same way a corporation's balance sheets are treated. Still, as the era of surplus politics begins, greater attention to the future bottom line could help prevent the giddiness from getting out of hand.

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Tricky Business

Ben Wildavsky — Tue, 06 Jan 1998 00:00:00 -0500

Where have you gone, Rosy Scenario? That disparaging nickname for an excessively optimistic budget forecast was as much a fixture of the 1980s as Ronald Reagan. For anybody following today's budget politics, however, it's hard not to conclude that, like the former President, Rosy has long since left town.

When Congressional Budget Office (CBO) director June E. O'Neill makes her yearly pilgrimage to Capitol Hill on Jan. 28 to discuss the CBO's annual economic and budget forecast, she'll probably face concerns about whether her agency is too gloomy these days, not too optimistic.

With a budget surplus just around the corner, lawmakers are tickled at the prospect of spending more money, cutting taxes, reducing the national debt--or some combination of the three. But legislators will have a hard time making plans for money that the CBO says the government doesn't have.

They have one big reason to be skeptical of what the CBO tells them about how much there is to spend: the unprecedented budget windfall of 1997. Last January, the CBO predicted a budget deficit for fiscal 1997 of $124 billion. But billions of dollars in revenues that no one had predicted began gushing into the Treasury Department's coffers. The CBO adjusted its deficit figures downward in the spring. Then--at a crucial moment in negotiations over last summer's balanced budget deal--it revised its numbers again, announcing that the deficit would fall by another $45 billion and predicting some $225 billion in extra tax revenues over five years. When the final numbers were tallied up in October, the year-end deficit turned out to be just $22 billion, $102 billion less than initially forecast.

Of course, the CBO was hardly alone in failing to foresee the rapid decline of the deficit. The White House Office of Management and Budget (OMB) was just as far off. And many private forecasters, who typically make general economic predictions but don't try to pinpoint the federal deficit, also missed the remarkable and continuing strength of the nation's economic boom.

The CBO took some heat for its rapidly changing estimates, but last year was by no means the first time the budget office figures had been off target. Eleven years ago this month, when then-CBO director Rudolph G. Penner testified before the Senate Budget Committee, Republican Pete V. Domenici of New Mexico made no bones about his unhappiness with the accuracy of the CBO's deficit forecasts. "Clearly, we need to do better," Domenici chided. The previous fall, the CBO had predicted a deficit of $151 billion, only to estimate several months later that the correct figure would be closer to $174 billion.

In those days, it was common for the CBO--along with OMB, its more politicized executive branch equivalent--to issue economic forecasts that proved to be too optimistic. In four of the five fiscal years preceding its 1987 prediction, the CBO's deficit outlook had also been too sunny. "We at CBO tend to err on the side of optimism," an agency staff member was quoted as saying at the time, in a National Journal article titled "CBO's Wishful Thinking."

Now, says CBO deputy director James L. Blum, "If anything, we're too cautious, we're too conservative." Blum, who has been with the office since it opened its doors in 1975, notes that the CBO has overestimated the deficit to some degree in 10 of the last 11 years.

The Grim Reaper

Like economic prognosticators everywhere, CBO economists are quick to point out that forecasting is the art of the possible. Forecasters must work with a huge number of variables to come up with estimates of everything from unemployment and interest rates to the nation's gross domestic product (GDP). They acknowledge that the $102 billion error in last year's deficit estimate was unusually large but say there's no sure way to prevent such errors in the future. "The unpredictable is the unpredictable," said O'Neill in a recent interview in her Ford House Office Building office. "A surplus in one year could very easily be followed by something else in the next year."

She points to numerous uncertainties: the impact of Asia's financial crisis on the U.S. economy; the potential for inflation to reemerge; the possibility that the United States has entered an unprecedented "golden age" of sustained economic growth; or the contrasting prospect that this will be a "turning-point year" in which growth declines sharply. "All of these things are possible--it would be hard to blame anyone for not knowing," O'Neill said. "This year is truly a very difficult year to be making either an economic forecast or certainly a budget forecast."

Although CBO directors often find themselves assailed by lawmakers who don't like the office's cost estimates for their pet proposals, O'Neill said she isn't feeling any particular pressure from Capitol Hill to make cheerier forecasting assumptions. "I think most Members realize that 1997 was an aberration. We couldn't be expected to know what nobody else foresaw," she said. Indeed, O'Neill believes the CBO's credibility is "quite high" these days--certainly in comparison to the early years of the office, which was created by the 1974 Congressional Budget Act. She headed the CBO's human resources cost estimates unit from 1976-79, after spending five years as a senior staff economist at the Council of Economic Advisers. "We were sort of the new guys on the block at the time," she said. "The budget committees were used to dealing with OMB."

Still, while CBO officials emphasize the inherent difficulties of forecasting, they're certainly aware that it doesn't look good to be as far off as they were last year--particularly when undue pessimism may force lawmakers to absorb fiscal pain they'd rather not endure. "We don't want to look like the Grim Reaper," said Rosemary D. Marcuss, the CBO's assistant director for tax analysis. She says it's "very painful" to miss the mark on projected tax receipts. "We'd rather be right sooner than later."

About 70 per cent of the CBO's overestimate of the deficit last year was due to its underestimate of tax revenues. By the end of last April, it became apparent not only that withheld taxes for the 1997 calendar year were coming in at higher-than-expected levels, but also that final income tax payments for the previous year were heftier than either Treasury or CBO models had predicted. "April is a tricky month," O'Neill said. "We had anticipated a good April, but as it turned out, April came in $25 billion higher than we had estimated." By the end of the fiscal year, revenues were more than $70 billion ahead of the CBO's--and OMB's--initial forecasts.

Revenue estimators have been scrambling for months to figure out where that extra money came from--and whether a repeat performance is likely this year. Marcuss said about $20 billion of the unexpected revenues came from a surge in capital gains realizations. Another $25 billion "is consistent with" wage and other personal income being above the levels that were predicted, leading to higher tax receipts from withholding, she said.

The origins of the rest of the money will remain somewhat mysterious until after June, when the CBO, Treasury and the Joint Committee on Taxation receive and begin analyzing detailed data files on 1996 tax returns. One possible explanation, Marcuss said, is that a disproportionate share of the extra personal income came from wage earners in high tax brackets. Another is that independent contractors and members of professional partnerships may have taken increasing advantage of Internal Revenue Service rules that allow them to delay tax payments--meaning that the revenue effects of a boom year in 1995 wouldn't be felt until April 1997.

However much progress they make toward figuring out what happened last year, the central question for Marcuss and other revenue estimators is whether the extraordinary revenue growth of recent years can continue. In normal years, growth in tax revenues tends to track growth in GDP fairly closely. "Yet for the last four years, tax growth has exceeded GDP growth," Marcuss said. "That can't happen forever."

If the good times do not keep on rolling, the chatter about the surplus that's dominating Washington budget circles may soon evaporate.

Getting Second-Guessed

On the spending side of the ledger, a portion of next year's federal outlays is reasonably predictable because the 1997 budget deal locked in maximum levels of annual discretionary spending. In addition, the agency's January forecast will spell out a set of key assumptions about the economy's future performance, from real growth and the level of inflation to unemployment and interest rates. The CBO's inflation estimates will in turn affect its spending estimates for veterans' benefits, Social Security and other programs that include cost-of-living increases indexed to inflation. Similarly, the CBO's assessment of which way interest rates are heading will determine how much it expects the government to spend on servicing the $5.4 trillion federal debt.

The CBO doesn't draw up its forecasts in a vacuum. To come up with a picture of future economic activity, staff economists rely in part on the Blue Chip Economic Indicators, a monthly survey of what 50 private forecasters are saying about economic trends. Then the agency runs its preliminary forecast past its panel of economic advisers. The 20-member advisory board includes two former CBO directors--Penner and Robert D. Reischauer--as well as a host of well-known economists, including Rudiger Dornbusch, Martin Feldstein, Lyle E. Gramley, N. Gregory Mankiw, Allan Meltzer, John Taylor, and James Tobin. After the panel's November meeting, which was also attended by a couple of private-sector forecasters and several House and Senate Budget Committee aides, the CBO made what Blum called "very minor changes" to its forecast.

In its midyear budget and economic forecast last September, the CBO estimated the fiscal 1998 deficit at $57 billion and the fiscal 1999 deficit at $52 billion. Given the continuing strong economy, Blum said, "there is an expectation that we'll be lowering those numbers when we come out in January" with the new projections--probably below the level of the $22 billion fiscal 1997 deficit. At the same time, that doesn't mean the budget office will be predicting a surplus as soon as some lawmakers might like to see one. The CBO's September report doesn't forecast a surplus until 2002, but Treasury receipts for the early months of fiscal 1998 have led some economists to predict a surplus this year. While he wouldn't go into any details of the CBO's forecast, which is completed in December for publication in January, Blum suggested the optimists shouldn't get too starry-eyed. "We will be projecting a significant slowdown in the rate of growth in revenues," he said, "and people are going to say, 'But why?' "

One good reason for the CBO to err on the side of caution, some suggest, is to keep its congressional clients happy. For all Members' eagerness to get their hands on a budget surplus, an overly rosy scenario from the CBO would bring the agency a lot more flak than it caught over last year's unduly gloomy prediction. CBO analysts "become more of a scapegoat if they overestimate the positive and underestimate the negative," said Mark A. Weinberger, an attorney with the law and lobbying firm Washington Counsel and the former chief of staff to the President's 1994 Bipartisan Commission on Entitlement and Tax Reform. "Congress never has a problem spending additional `found money.' They're always going to have a problem when they have to start making cuts from money they thought they had, that they end up not having."

The real problem with deficit forecasts made by both the CBO and OMB is that they tend to smooth out the economic cycle and fail to predict either recessions or years of high growth, says budget and tax expert C. Eugene Steuerle, a senior fellow at the Urban Institute. "Past economic cycles have not yielded obvious statistical patterns by which to portend the future," he wrote recently in his regular column for the trade weekly Tax Notes. Since forecasting turning points is so difficult as to be seldom accurate, "those in charge of projections would feel mighty silly every time a predicted year of recession went by without a downturn."

Indirect political pressures also contribute to the problem, in Steuerle's view. "To make matters worse, predicting the precise point of a downturn would also imply the failure of the executive branch or the Congress or the Federal Reserve Board at that point in time, but not others," he wrote. "Predicting a recession in the next year could be interpreted as implying a lack of faith by budget analysts in their own bosses."

No matter where the CBO pegs the economic and budget figures that kick off this year's taxing-and-spending debate, it's probably inevitable that the budget office will be second-guessed. The CBO hopes to forestall some of that by devoting a lot more ink than usual in its January report to explaining the nuts and bolts of its forecasting assumptions. "We pride ourselves on really exposing all of our work, not having any secrets, so Members and the general public can understand what our thinking is, what we did to arrive at the forecast," O'Neill said. If, say, the revenue forecast proves too low once April tax returns are in, anybody suspicious of a CBO-engineered "windfall" can look up exactly what the budget office was counting on for that period.

Whatever slings and arrows come the CBO's way this year, the analysts at the budget office seem prepared to face them with the equanimity for which economists are known. Said O'Neill: "The CBO motto is, On the one hand . . . on the other hand."

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After the Deficit

Ben Wildavsky — Mon, 01 Dec 1997 00:00:00 -0500

When the East-West standoff that drove America's foreign policy for 40-plus years evaporated, what was the average Cold Warrior to do but go find a new line of work? Eight years after the fall of the Berlin Wall, the die-hard anti-Communist intellectuals at the Committee for the Free World have long since closed up shop. Soviet Prospects, a think-tank newsletter put out by the Center for Strategic and International Studies, has become Post-Soviet Prospects. Elliott Abrams, onetime Iran-contra stalwart, is now head of a think tank devoted to religion and public policy; he recently wrote a book on the future of American Jewry.

Which brings us to the budget deficit. Just as the Cold War dominated post-World War II foreign affairs and gave birth to an entire class of analysts and interest groups, the often-alarming gap between what the U.S. government spends and what it collects in tax revenues has ruled domestic politics since at least the early 1980s. And the steep rise of the deficit was accompanied by a swelling of the ranks of budget wonks in general and deficit hawks in particular.

But now, to everyone's surprise, the deficit has almost disappeared. In late October, the Administration announced that the deficit for the just-ended fiscal year 1997 was $22.6 billion--a drop in the bucket compared with the $120 billion-plus forecasts made at the beginning of the year by both the Office of Management and Budget and the Congressional Budget Office (CBO).

Because of a combination of economic good times and budget disciplines enacted in recent years, the deficit stands at just 0.3 per cent of gross domestic product (GDP). This figure is so low--the deficit was last at this percentage of GDP in 1974--that it's widely viewed as the equivalent of no deficit at all. Now Washington is placing bets on (a) how soon the seemingly inevitable budget surplus will materialize, and (b) how to deploy the extra dollars the minute they show up in the Treasury's coffers.

So where does all this leave the capital's budget prognosticators and deficit-busters? Will the hawks be grounded? Is there life after the deficit? Or will the budget warriors, like the Cold Warriors before them, simply take their bows for a noble mission accomplished and quietly move on?

Budget gurus have certainly given some thought to their predicament in the post-deficit world. "That's why I've been shifting into Medicare for the last five years," quips Robert D. Reischauer, a former CBO director who now holds forth on fiscal matters from his perch at the Brookings Institution. For a decade and a half, he said, "troop strength in the budget battle has grown significantly. Now we're going to go through a downsizing period."

But why downsize if you can retool instead? The groups that have battled to keep government spending in check have at least one thing in common with the self-perpetuating federal bureaucracies that they have long assailed, said Stephen Moore, director of fiscal policy studies at the libertarian Cato Institute. "Just as they say that government programs are immortal, so are think tanks and public-interest groups," Moore said. "When their mission goes away, they find new missions."

Reforming Entitlements, Protecting Surpluses

Naturally, advocates say they're not obsolete. "Are we like the March of Dimes and we have to get a new disease?" rhetorically inquired Martha Phillips, executive director of the Concord Coalition. Not at all, she said.

So what if Phillips's grass-roots organization--founded in 1992 by the late Sen. Paul E. Tsongas, D-Mass., former Sen. Warren Rudman, R-N.H., and former Commerce Secretary Pete Peterson--has all but realized its long-standing goal of wiping out the deficit? For Phillips and other fiscal-responsibility crusaders, the looming problem of funding Social Security and Medicare for retiring baby boomers--which is projected to cause big future deficits--is the new public enemy No. 1.

Phillips insists that deep-sixing the deficit was never her group's sole raison d'etre. "Balancing the budget we've always seen as just a good base camp from which to launch the next big push," she said. With the huge baby boom generation still in the workplace, now is the perfect time, Phillips contends, to mount an assault on the summit: the "unsustainable burden" of paying for their future Medicare and Social Security benefits. Concord recently launched its "Paul Tsongas Project," which features public forums and role-playing exercises on the need for entitlement reform.

Like-minded organizations also are substituting entitlement reform for deficit-obsession. Since its founding in 1982, the Committee for a Responsible Federal Budget has devoted itself both to bringing order to the federal budget process and to spreading the message that--as its brochure proclaims--"huge, continuing deficits" threaten "the very fabric of our nation's economic and political life." Now, with funding from American Express Financial Advisors, the nonprofit group is kicking off a 10-city tour in January that's designed to focus attention on entitlements. The "Graying of America" project will focus on the "ticking time bomb" of government spending in an aging society, according to the organization's vice president, Susan Tanaka.

To be sure, reining in spending on the nation's massive social insurance programs had long been an agenda item for these groups. But they moved entitlement reform to the top of their lists right around the time the Clinton Administration unveiled its five-year balanced budget plan in early 1997. White House officials were not amused. "They were moving the goal post even before we'd scored," said one Clintonite, dismayed that the deficit hawks slammed the President's plan--and the final balanced budget deal reached over the summer--for not doing enough to address long-term funding of government pensions and health care.

The deficit warriors' new focus comes with one big problem: The proverbial entitlements time bomb is ticking quite a bit more slowly these days. A General Accounting Office (GAO) report in October projects that if no action is taken to curb federal spending on entitlements such as Medicare and Social Security, the deficit will reemerge in 2012 and gradually "escalate" as the baby boomers retire. By 2024, the GAO projects, the deficit will be about 4 per cent of GDP.

Although longer-term predictions are more dire, that's a vast improvement over projections made just a couple of years ago--and well within the bounds of recent experience. In 1992, the deficit was 4.7 percent of GDP. "You look at those figures and you say, `We're talking 30 years before we get to something that's as big a crisis as what we endured in the early '90s,' " Reischauer said.

This postponement of the day of reckoning "makes our job harder," Phillips conceded. "Instead of saying disaster's right around the corner, now it's down the road and around the bend."

Because the entitlement problem, while still serious, is "receding," Phillips and company may have trouble finding an audience, Reischauer said. "It's the Lord's work--but will anybody listen to the Lord? This is a town that focuses on a few immediate and serious issues. It's going to be awfully hard to get the political system to address problems in a preemptive fashion." For politicians, he said, fiscal shortfalls that emerge a couple of decades into the next century are "two political lifetimes away."

Meanwhile, the prospect of short-term budget surpluses has Washington politicos and interest groups salivating. Anti-deficitologists say that means there's another kind of work to be done: playing defense.

Every month or two during 1997, government forecasters seemed to issue a new deficit projection that was even rosier than the one before it. And it wasn't long before congressional Republicans began quarreling among themselves about whether to devote budget surpluses to tax cuts, reducing the country's $5.4 trillion debt or spending on everything from highways to defense to scientific research. For their part, liberal Democrats such as Sen. Edward M. Kennedy of Massachusetts started drawing up wish lists in areas such as education and child care.

In the face of these pressures, "Concord and other organizations have to switch from calling for further policies to balance the budget to watchdog mode," Phillips said. "We've become `surplus hawks.' And believe me, maintaining the surplus is going to take as much work as, if not more than, getting rid of the deficit."

"A Whole Class of Priests"

Some budgeteers maintain that the new era of surpluses could actually bring them more business than ever before. After all, the age of the deficit didn't spawn just deficit hawks--it also created what Reischauer calls "a whole class of priests" to whom outsiders could turn to interpret the often-arcane and complicated budget process that was put into place to restrain spending.

Some members of the order, like Reischauer himself, can be found in think tanks and on the academic seminar circuit. Others have turned the deficit--and the intense interest in budgetary matters that went along with it--into a private-sector bonanza.

Perhaps the consummate budget entrepreneur is Stanley E. Collender, a onetime Capitol Hill aide who's now in the Washington office of the public affairs giant Burson-Marsteller. Collender pens a fortnightly budget newsletter, consults for an assortment of Wall Street and corporate clients, and produces a book-length Guide to the Federal Budget each year around the time the President's budget is introduced. (He also writes a weekly column for Cloakroom, a Web site operated by National Journal Group Inc.)

Although Collender has gotten plenty of attention over the years for his projections about government red ink, he maintains that the era of surpluses will be just as good to him. "I'm expecting to be busier than ever next year," Collender said. That's partly because fiscal constraints made the annual budget process fairly predictable in an age of deficits, he said, whereas the post-deficit era introduces so much uncertainty that a tour guide may be more necessary than ever. "This is a whole new world," he said. "The average person sitting in a corporate office or a Washington lobbying office is saying, `Wait a minute. What do you mean, "surplus"? And what does it mean for me?' "

Collender is already spending lots of time advising corporations and trade associations on the ins and outs of the President's new line-item veto authority. They want to know everything from how to draft a budget provision that won't be susceptible to the veto, to how to find out if an item they favor is in the crosshairs of the White House, to how to persuade the Administration to shoot down a provision that they don't like.

Beyond the interest groups and the analysts, what will happen in the post-deficit world to the politicians who have made fiscal discipline their calling card? How will the likes of Ross Perot and House Budget Committee chairman John R. Kasich, R-Ohio, spend their time now that the prospects of such measures as a balanced budget amendment to the Constitution seem dim indeed?

Kasich says he isn't worried. "There's probably some people fumbling around, but I'm not," he said in an interview. He's been holding hearings on what comes next after the budget is balanced and is contemplating a presidential run.

Kasich says he won't miss having the deficit to kick around. In fact, he maintains he never really cared all that much about the mechanics of balancing the government's books. "You don't think I ever had any interest in the dry bones of the federal budget?" he said. "The reason I became Budget chairman is because it gave me the opportunity to essentially be in everybody else's business. . . . The budget was never about dollars and cents. It was the vehicle to talk about people."

That observation will remain true, of course, deficit or no: Government budgets are about the nation's values. In fact, without the intense fiscal pressures that in recent years have frustrated conservative tax cutters and liberal spenders alike, the post-deficit budget debate will highlight more than ever ideological differences over the proper role of government. Wherever that leaves deficit hawks, it could be good for the country.

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Budget Hawk Eyes White House

Ben Wildavsky — Mon, 17 Nov 1997 00:00:00 -0500

Could the demise of the federal deficit prompt House Budget Committee chairman John R. Kasich, R-Ohio, to make a presidential run in 2000?

Veteran GOP spin-meister Edward W. Gillespie hopes the challenge will prove irresistible to the exuberant eight-term Member. "It's like the Disney World commercials," he cracks. " 'John Kasich, what are you going to do now that you've balanced the budget?' "

Gillespie, a former Republican National Committee (RNC) communications director, is part of a coterie of party activists who are informally advising Kasich on a possible bid for the Republican nomination. The group includes former RNC hands Curt Anderson, Donald L. Fierce and Charles Greener; consultants Russ Schriefer and Stuart Stevens; and GOP pollster Ed Goeas.

They're convinced that Mr. Deficit Hawk has a shot at becoming Mr. President.

So what's the case for Kasich? "Rank-and-file Republicans in the real world see him as an effective leader, a compassionate conservative and a new generation of leadership," Gillespie said in a recent interview. "Everywhere he goes he sparks this enthusiasm and excitement. People really respond to him. He connects."

Kasich himself says he's undecided. "It's really not unlike Mount Everest," he said in an interview. "You look at the mountain, and then over time, you just try to make an assessment of 'Do I have the guys who can climb with me, do I have the good Sherpas, do I have the resources to finance an expedition, am I going to be trained enough, fit enough to be able to do it?' I think that on most of those questions, I haven't made any decision. . . . I'm thinking about it."

What Kasich most cares about, he said, is not landing a particular job, but spreading his message of smaller government, personal responsibility and "breaking down the power of the elite" on issues ranging from school vouchers and Internal Revenue Service reform to "corporate welfare" at the Pentagon.

He's certainly boosting his visibility, often a clear sign of budding presidential aspirations. Kasich traveled to 38 states in 1996, and he's continuing a busy schedule of stumping for GOP candidates. Among his recent journeys: a three-day October swing through Iowa, the site of the caucuses that will kick off the presidential nominating season in 2000. He's also working on a book about ordinary Americans who've done heroic things. And last December, Kasich set up a political action committee, Pioneer PAC, which had raised about $180,000 as of early November 1997, according to his spokesman, Bruce Cuthbertson.

But for all Kasich's allure to some GOP regulars and Reagan Democrats, there are plenty of obstacles between him and the Oval Office. For one thing, conventional political wisdom places high odds against anybody making a winning run from the House. For another, battling to the top of a party ticket is a multimillion-dollar proposition--and Kasich's ability to raise big-denomination bucks is as yet unproved. Then there are the early poll numbers. Kasich ranked last among potential contenders for the GOP 2000 primary in a September poll conducted by Peter D. Hart and Robert M. Teeter for NBC News and The Wall Street Journal.

Gillespie insists that Kasich "would be a very appealing candidate," and he may well be right. But if the congressional budget guru finds himself with time on his hands in the postdeficit era, Disney World could turn out to be a much more realistic destination than 1600 Pennsylvania Ave.

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Taxing Decisions

Ben Wildavsky — Mon, 03 Nov 1997 00:00:00 -0500

Nearly 50 percent of Americans say they'd rather have their wallets stolen than be audited by the Internal Revenue Service (IRS). That factoid, highlighted in a recent mailing sent out by once and future presidential candidate Steve Forbes, dramatically illustrates the public sentiment that led the White House to execute a striking about-face. On Oct. 21, Treasury Secretary Robert E. Rubin declared that the Clinton Administration would support an IRS restructuring bill it had been denouncing for months.

Treasury officials tried to shrug off their unexpected maneuver as a reasonable response to altered circumstances. The latest version of the measure, which had just been unveiled by House Ways and Means Committee chairman Bill Archer, R-Texas, included several deal-making changes, they insisted. Chief among them: the President would retain his ability to hire and fire the IRS commissioner--a power the original proposal would have handed to a new IRS oversight board dominated by private-sector members.

"We felt it was very important to maintain central principles," deputy Treasury secretary Lawrence H. Summers told reporters. "Relative to some of the proposals that were circulating as recently as a few days ago, we have made very substantial progress in getting this bill to be something that with further evolution we can be very comfortable with."

Nevertheless, as insistently as the Administration rationalized its reversal, a number of experts on the IRS complain that maintaining "central principles" is precisely what it didn't do. "This was a stampede, and they had a choice of either being trampled or joining in--and they decided to join it," said Donald F. Kettl, director of the LaFollette Institute of Public Affairs at the University of Wisconsin (Madison). G. Jerry Shaw, a lawyer who spent a decade at the IRS and who now represents senior federal civil servants in his private practice, agreed that the shift was "the least exercise of a profile in courage I've seen for a long time," adding, "I think the Administration just took a dive on this."

With House passage of the restructuring package virtually assured and Senate action likely in the new year, some specialists fear that Washington is rushing headlong into an unprecedented IRS overhaul that represents the triumph of politics over substance. "There's an often-disturbing tendency in Washington," Kettl said, "to leap quickly into management reforms without thinking whether those reforms are going to solve the problems, and I think that's the case here."

Yes, Politics Was Involved

Treasury officials say they negotiated several key compromises that made the bill palatable. Along with the changed hiring and firing provision, the Administration welcomed language in the revised bill stating explicitly that the new oversight board wouldn't control the IRS's law enforcement activities and that the Treasury Secretary would retain authority over the IRS commissioner.

Treasury officials still worry about a provision in the bill that would shift the burden of proof in tax court cases from the taxpayer to the IRS. But, they emphasized, unlike more- radical proposals that have been floated over the years, this provision would still require taxpayers to keep records that substantiate the income and deductions they claim on their tax returns.

For all the substantive details cited by Treasury, there's no great mystery behind the politics driving the White House's change of heart. To many analysts, the only surprise was that the Administration didn't act sooner to jump on the anti-IRS bandwagon.

White House and Treasury opposition to the IRS overhaul bill had become increasingly hard to sustain following the Senate Finance Committee's showy September hearings, where taxpayers recounted harrowing tales of mistreatment by the IRS. Although the overhaul legislation grew out of recommendations made in June by the bipartisan National Commission on Restructuring the IRS, co-chaired by Sen. Robert Kerrey, D-Neb., and Rep. Rob Portman, R-Ohio, the Finance Committee hearings led Republicans to redouble their efforts to seize the tax issue as their own.

Because Hill Democrats didn't want to get left in the dust, it became ever more likely that the restructuring bill would pass the House with a veto-proof majority. To cap it all off, Vice President Al Gore's likely No. 1 opponent in the 2000 presidential primary season, Minority Leader Richard A. Gephardt, D-Mo., announced his support for the measure. The words were barely out of his mouth when Rubin declared that the Administration would back the bill, letting the White House cut its losses and--maybe--robbing Republicans of a midterm campaign issue.

But while the populist appeal of shaking up the tax- collecting agency is widely understood, there is less consensus among experts that the restructuring legislation will really accomplish much. To be sure, students of the IRS applaud many parts of the measure, including proposals to improve procurement and personnel practices and to beef up congressional oversight. But by far the most radical and contentious element of the shake- up plan, the provision that once seemed certain to be a deal breaker for the Administration, continues to be the oversight board.

The commission Kerrey and Portman headed initially recommended a seven-member board. Now the revised legislation calls for 11 members: eight private citizens from outside the federal government with expertise in such areas as "management of large service organizations," information technology and federal tax laws; the Treasury Secretary or deputy secretary; a representative of the tax agency's employees' union; and the IRS commissioner. The private-sector and union members would be appointed by the President and confirmed by the Senate.

The board would have significant powers. It would oversee the agency's strategic plans, review its basic operations and approve its annual budget request. The President would be required to submit the board-approved budget to Congress each year, although he could also submit his own separate budget for the agency.

Boosters of the oversight board maintain that the Treasury Department simply has too much else to do for it to adequately ride herd on the IRS.

"Treasury also oversees U.S. domestic and international financial, economic and tax policy, including the specific responsibilities for managing at least 10 other major agencies and bureaus, such as the Office of the Comptroller of the Currency; the Bureau of Alcohol, Tobacco and Firearms; the Customs Service; the Office of Thrift Supervision and the Secret Service," Portman said in a July 31 statement that accompanied his bill. "The lack of focus on the IRS is a natural result of these distractions and the disconnect between the important policy functions of the Treasury Department and the operational challenges of the IRS."

Nuns and Monks Wouldn't Do

Until its recent flip-flop, the Administration argued strenuously that the oversight board would give the private sector unacceptable power over a fundamental function of government. It singled out for concern what Treasury Department general counsel Edward S. Knight, during remarks in August to an American Bar Association (ABA) gathering, called "the potential conflicts of interest and appearance problems created by this private-sector board with vast power over every American." He raised the specter of "the CEOs of IBM (information technology), American Express (customer service), GE (organization development) and H & R Block (service organization) meeting to discuss the appropriate audit policy for the IRS."

Knight also told the ABA tax section's annual meeting that under the legislation, the part-time commissioners would be treated as "special government employees." Such employees are subject to ethics rules different from those that apply to full- time government officials and, with some restrictions, may represent private parties before the agencies they serve. "Therefore," Knight said, "the chairman of XYZ can serve on the IRS board on Monday, in which general procurement policies and strategies are discussed, and then turn around on Tuesday and represent XYZ in a procurement contract pending before the IRS. He can get a bonus from his company for his procurement work at the IRS. How long would the American people stand for that?"

The latest version of the restructuring legislation says the board would have no involvement in "specific procurement activities," but that restriction might not address Knight's concern. In theory, a board member who works for IBM could still participate in a general board decision about whether the agency should switch from mainframes to PCs. If PCs got the nod, IBM's IRS board member could then be permitted to go to bat for IBM against Compaq in his private role.

Knight's concerns aren't all that far-fetched, according to Donald C. Alexander, IRS commissioner from 1973-77 and now a partner at Akin, Gump, Strauss, Hauer & Feld. If a former airline CEO is named to the board and the IRS has to make a major decision on, say, how it treats airline taxes, Alexander said, "is anybody going to believe that there wasn't undue influence there?" The board will represent "a field day for the Washington press, because of the perception, if not the reality, of conflicts of interest," he maintained.

Kettl, who heads the Brookings Institution's Center for Public Management, recently wrote a critical assessment of the Kerrey-Portman commission's blueprint. Despite the changes that have been made in the current legislation, he calls the private- sector board "a terrible idea that may also be irrelevant."

Kettl's complaint is partly practical and partly philosophical. He believes that the IRS has three central problems: providing better customer service, ensuring better taxpayer compliance and solving its $4 billion computer mess. There's no reason to believe that simply creating an oversight board will fix these, he said. The board won't have an easy time "grabbing the IRS by the scruff of its bureaucratic neck" and forcing changes in problems deep within the agency, he said. What's more, Kettl noted, changing burden-of-proof rules could well make it harder to improve compliance.

Philosophically, he argues, private-sector IRS oversight simply goes too far. "A public board on the outside can play a valuable role in focusing attention" on the agency, he said. "But the problem is that creating a board that has authority over the IRS crosses the line over what should and shouldn't be in the hands of the private sector." Backers of the overhaul have noted that the private-sector members won't necessarily come from the corporate world--some might be academics, state tax officials or executives of nonprofit organizations. But Kettl says if he were to serve on such a panel and the subject of tax treatment of donations to universities came up, he'd have to recuse himself, or he would create "at least the appearance" of a conflict of interest. "Even if you had nothing but nuns and monks" on the board, he said, "you'd still get questions about charitable donations to religious organizations."

Restructuring proponents say that plenty of safeguards would be in place against conflicts of interest--including the public nature of the oversight board's work and the fact that nominees to the panel would undergo Senate scrutiny. "The Secretary of the Treasury himself was CEO of Goldman, Sachs and now is managing a significant part of the fiscal policy of the United States," said Kerrey in an interview, "and nobody accuses Bob Rubin of having a conflict of interest." That might not be true, of course, if Rubin had continued working for Goldman, Sachs while overseeing major Treasury activities on a part-time basis.

Yale Law School professor Michael J. Graetz, a former Bush Administration Treasury Department official, agrees that the conflict-of-interest concern has been overblown. "Corporate managers are always being accused by their shareholders of looking out for themselves and not their corporations--so now we're going to accuse them of looking out for their corporations and not themselves?" he said. In general, he thinks attention has focused too much on the oversight board--"it's hard to believe it's going to make management worse"--and not enough on the other reforms proposed in the legislation.

The overhaul would also improve executive branch oversight by requiring that the Treasury Secretary, the IRS commissioner and the oversight board "actually sit down and have meetings and converse about a budget," Graetz said. "Without this structure, it's up to the Secretary of the Treasury to decide how much time he wants to spend on the IRS budget--and it may be very little, given other demands on his time."

In an interview, Summers said the Administration will still press to change the legislation in such areas as "addressing the nature of the ethics restrictions on the members of the board" and "clarifying the approach on burden of proof." But he said the White House agreed to support the overhaul because it didn't want lingering disagreements in these areas to overshadow the "huge amount that hasn't been controversial that's contained in these bills"--including provisions that provide greater personnel flexibility, institute longer-term budgeting and establish a five-year term for the IRS commissioner.

The Administration's reversal--combined with the friendly reception that its nominee to head the agency, technology executive Charles O. Rossotti, has received in the Senate--has certainly frustrated some Republicans, who fear losing their lead over Democrats on tax issues. But damage-control doesn't necessarily make good policy. If the new private-sector board becomes a reality, but doesn't produce the promised results and instead generates problems of its own, a few years from now plenty of policy wonks will be saying "I told you so," to politicians who should have known better.

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Social Insecurity

Ben Wildavsky — Tue, 14 Oct 1997 00:00:00 -0400

At Kenneth S. Apfel's confirmation hearing as Social Security commissioner last month, social policy guru Sen. Daniel Patrick Moynihan, D-N.Y., declared Social Security "the single most important domestic program in the federal government." Apfel certainly didn't quarrel with that assessment. He called the massive system of retirement, disability and survivors' benefits that he would soon be running "the most successful government program in our nation's history."

For all of Social Security's success, however, in providing what President Roosevelt called "some measure of protection . . . against poverty-ridden old age," the signature program of the New Deal is now at a crossroads. The 76 million Americans born between 1946 and 1964 will begin retiring early in the 21st century. Before long, the payroll taxes of the smaller generations behind the baby boom won't be able to meet the federal retirement program's costs. If the program stays on its current course, estimates are that payroll tax revenues will lag behind annual spending by 2012 and that the Social Security trust fund will go bust by 2029.

So now, 62 years after it was created, Social Security is in for some changes. With this year's balanced budget deal behind him, President Clinton has pledged to tackle entitlements next. He's due to name members to a commission on the future of Medicare by Dec. 1. In the meantime, his economic advisers are scrambling to figure out just when and how to broach the explosive subject of Social Security reform.

Treasury Secretary Robert E. Rubin, Office of Management and Budget director Franklin D. Raines and National Economic Council (NEC) chairman Gene B. Sperling have been mulling reform options at recent NEC meetings. Apfel, a former associate director for human resources at OMB, will also be a key player in the overhaul effort.

There's some sentiment among Clinton's economic advisers that Social Security reform should be tackled before Medicare, on the grounds that the Medicare changes in the recent budget deal should be given time to play out in the rapidly changing U.S. health care market. But although the President read some Social Security briefing papers during his summer vacation, no major decisions on the substance or timing of the Administration's efforts have been made so far.

Determining the program's future will be "the most fundamental debate we have in the next several years," Apfel told the Senate Finance Committee on Sept. 10. Evolution is nothing new for the program, he emphasized, quoting former Health, Education and Welfare Secretary Wilbur Cohen's remark that "each generation should be free to remake it and remold it to its needs and to its liking."

Still, while everybody seems to agree that Social Security needs fixing, the key question is just how much change is in order. Does the program's machinery need fine-tuning, retooling, or a complete redesign?

The effort to update the Social Security program certainly isn't going to take place in a vacuum. With the program's future up for grabs, would-be reformers at think tanks and interest groups have been churning out press releases and proposals for change. They're positioning themselves to mold the debate in Washington and around the country, with some advocating a completely privatized national pension system and others calling for various "middle-ground" plans. Those less-radical schemes would both shore up the government-run retirement program and establish individual retirement accounts that would let workers invest their pension money in the stock market.

At the same time, defenders of the traditional approach to social-insurance programs are beginning to mobilize. They're busy decrying what they consider alarmism over the future of Social Security and speaking out against privatization and other wholesale program changes. Incremental fixes to Social Security, they insist, are all that the program requires.

Here's a look at some of the players and interest groups who will be driving the Social Security debate in the months and years to come.

Privatization's Friends

Any who's who of Social Security privatizers has to begin with the Cato Institute, the free-market think tank that looks to private markets to solve many social-policy problems that others regard as the province of government. Cato is spending some $3 million on its multiyear Project on Social Security Privatization to develop and market a blueprint based on Chile's transition from a public to a private pension system.

"It's Cato's No. 1 issue," said Leanne J. Abdnor, the group's vice president for external affairs. "As far as think tanks go, we're doing far and away more than anyone else." She estimates that she's spending 95 percent of her time on the privatization project, which is headed by Cato scholar Michael Tanner. Its advisory board is co-chaired by Jose Pinera, the architect of Chile's system, and William Shipman, a principal at the State Street Global Advisors investment firm.

State Street has chipped in $20,000 toward Cato's Social Security project. Other corporate contributors, which Abdnor said have typically donated between $20,000 and $50,000, sometimes for two or three years running, include American Express Co., Citibank, Alex. Brown Inc., the insurance giant AIG, International Business Machines (IBM) Corp. and Digital Equipment Corp. Such donations--particularly contributions from banks and investment companies--tend to buttress the suspicions of privatization foes that Wall Street firms, which stand to gain from a system of personal retirement accounts, are driving Social Security reform efforts. But some other groups advocating Social Security privatization insist they've had no luck raising funds from Wall Street, perhaps because investment firms fear that they will appear greedy if they publicly support individual accounts.

Cato's offensive includes position papers, op-ed pieces and educational videotapes (including one titled An American Crisis: Social Security and You). The think tank also sponsors frequent policy forums and conferences. In December, it will hold a major international gathering in London--"Solving the Global Public Pension Crisis: Opportunities for Privatization"--cosponsored by The Economist magazine. A Cato delegation met recently with the NEC's Sperling to make its privatization pitch.

Libertarians aren't the only ones looking to revamp Social Security. Democrat Sam Beard, a onetime aide to the late Sen. Robert F. Kennedy who has spent nearly three decades as head of a Delaware-based nonprofit group called the National Development Council, is crusading for private retirement accounts through Economic Security 2000, a group he founded in 1995. He and his small staff travel the country speaking to Rotary Clubs, editorial boards and civic groups in an effort to build a state-by-state grass-roots network of volunteer activists. Their goal: replacing today's pay-as-you-go Social Security program with a funded pension system of individual accounts invested in the stock market. "If there's no grass-roots pressure, we won't adjust Social Security until there's a crisis, and then it's too late," Beard said in an interview.

The organization has chapters in 23 states so far, with about 10,000 members. But its size pales in comparison with the 200,000-strong membership roster of the Concord Coalition, the grass-roots anti-deficit group founded by the late presidential candidate Paul E. Tsongas. But Beard's group has plenty of organizing experience--several of his young employees got their start working for Tsongas and Concord--and he hopes to boost the group's membership and its finances with a direct-mail campaign early next year.

Economic Security 2000 also works in tandem with larger organizations such as the United Seniors Association, the 60-Plus Association, the National Association for the Self- Employed, the United States Junior Chamber of Commerce (Jaycees) and the National Grocers Association. The group has a budget of about $750,000 for 1997 and aims to raise $2.5 million in 1998. It has received grants from several foundations, including the John M. Olin Foundation, the M.A. Schapiro Fund, the Milliken Foundation, and the J.M. Kaplan Fund, which has provided financial backing to several organizations working on privatization plans.

Beard's group has also received personal donations from two board members: Robert W. Galvin, the former CEO of Motorola Inc.; and Edgar S. Woolard Jr., the chairman of the board of E.I. Du Pont de Nemours & Co.

Interlocking Directorates

The world of Social Security reformers is a small one, full of overlapping activities and interlocking directorates. Another central player is Mark A. Weinberger, the former chief of staff to the President's 1994 Bipartisan Commission on Entitlement and Tax Reform, who's now an attorney with the law and lobbying firm Washington Counsel. A tax lawyer by training, Weinberger was chief tax and budget counsel to former Sen. John C. Danforth, R-Mo., then moved on to the entitlement commission, which was co-chaired by Danforth and Sen. Bob Kerrey, D-Neb.

Weinberger sits on Cato's privatization advisory board, although he doesn't advocate outright privatization. Instead, he prefers a "two-tiered approach" that would address the long-term solvency of the system while also introducing private retirement-savings accounts. He also sits on a 24-member panel on retirement policy established this year by the Center for Strategic and International Studies, a Washington think tank better known for its right-of-center foreign policy analysis. Weinberger's firm itself held a major Social Security conference last year, hosts speakers on a regular basis and is planning a series of conferences for 1998 to review the status, politics and substance of the retirement policy debate.

Weinberger said his personal interest in and knowledge of the subject--and not any paying clients--are what drives his involvement in the issue. "We don't really have any clients who pay us to lobby on Social Security," he said. "I'm not aware of a lot of people paying for Social Security representation, mostly because most people don't know what the right answer is." He's among those who believe many Wall Street firms have been scared away from actively backing private accounts by articles in The Wall Street Journal and elsewhere suggesting that investment houses are salivating at the prospect of hundreds of millions of dollars in new commissions. Still, Weinberger said, "I do think, over time, this debate is going to...attract a lot of attention and resources."

Weinberger and a dozen other retirement-policy reformers sit on the board of a new organization called the Retirement Security Alliance, which they formed recently to coordinate the multitude of Social Security overhaul initiatives now under way. Headed by 34-year-old Jonathan Edwards, a Tsongas campaign veteran who went on to become Massachusetts director of the Concord Coalition, the alliance is run from a small office provided by Weinberger's downtown Washington firm. The group hasn't united on a particular Social Security proposal--its mission statement calls vaguely for "public education" and "innovative solutions"--but its members are clearly sympathetic to some variation on the theme of private retirement accounts invested in the stock market.

The coalition's board members include Abdnor of the Cato Institute (who also sits on the board of the Secure Retirement Coalition, a networking group of Washington women who follow retirement policy); representatives of the Jaycees, IBM, Pfizer Inc., State Street Global Advisers and the Securities Industry Association; Brian Keane, the executive director of Economic Security 2000; representatives of the National Urban League and the National Association of the Self-Employed; Martha Phillips of the Concord Coalition; and Richard Thau, who heads the fiscally conservative Generation-X advocacy group Third Millennium and who first began efforts to organize a reform coalition last November.

With the federal deficit now on the wane, Concord recently launched its own entitlement reform campaign, dubbed the Paul Tsongas Project, with financial support from the National Association of Manufacturers. By hosting public forums around the country, the project will play up the need for far-reaching Social Security and Medicare reforms. It will also use a role-playing game, modeled after Concord's anti-deficit exercises, in which participants review policy options and draw up reform plans.

And yet another grass-roots effort to push for Social Security changes will soon be undertaken by Citizens for a Sound Economy (CSE), which has close ties to GOP legislators. The Washington-based free-market advocacy group has 250,000 members and offices in eight states.

Elizabeth Tobias, CSE's director of tax and budget policy, offered few specifics about the group's plans, but said in an interview that the budget for the Social Security initiative will be "in the millions of dollars."

Fighting the Onslaught

So what are anti-privatization groups doing to defend the traditional Social Security program from this onslaught of advocacy? To some extent, labor and senior citizens' groups seem to be keeping their powder dry, as they wait to see what specific proposals emerge when the White House and Congress take on retirement policy in earnest. After all, the burden of proof--and the highest political risk--will probably lie with those who want to significantly transform Social Security.

Meanwhile, just like their adversaries, traditionalists are talking about the need to educate the American public. But unlike the privatizers, they believe the key lesson to pass on is that the sky is not falling, and that dramatic changes will cause more problems than they solve.

Gerald Shay, an AFL-CIO social policy analyst and a top aide to the labor federation's president, John J. Sweeney, said the labor group's leadership has been engaged in "an internal process" to decide what kind of educational campaign it wants to undertake. The effort will be launched this fall, he said, and would have started even sooner had the union not been sidetracked by this year's budget battle and the ongoing debate over fast-track trade-negotiating authority.

"I expect this to be a major, long-term campaign because of the importance of the issue," said Shay, who served on the sharply divided 1994-96 Advisory Council on Social Security, which issued its final report in January. He was a member of the traditionalist contingent led by former Social Security commissioner Robert M. Ball. That group strongly opposed the varying degrees of privatization proposed by the two other factions, although it did suggest that the government itself might boost Social Security returns by investing a portion of payroll tax revenues in private securities.

Shay said the labor group has not yet decided on a clear battle plan for the fight ahead. "We don't really know what shape the policy debate will take, and that will determine what specific tactics we use." He noted that the AFL-CIO's internal polling shows that union members support Social Security even more strongly than other groups do, which means that the AFL-CIO's approach to mobilizing its own members will most likely be somewhat different from its efforts to shape the general public's perception of the program.

Still, Shay made clear that the labor federation can bring plenty of muscle to bear on the issue when it decides the time is right. He pointed to its recent efforts to oppose fast-track trade authority: $1.5 million in television ads, nearly a million pieces of mail sent to voters in the districts of 80 House Members who are crucial swing votes in the debate and plans for making half a million phone calls from paid phone banks. "That's an example of the kind of thing that we would do over Social Security legislation," Shay said. Labor unions have also contributed to liberal advocacy groups such as the Campaign for America's Future, which has taken a strong stand against privatization.

At the American Association for Retired Persons (AARP), the talk is also of education and outreach. "With respect to the long-term solvency of [both] Social Security and Medicare, we believe the next step is to begin a public debate about the nature of the problem," said the group's chief lobbyist, Martin Corry. "That's the first step, as opposed to what I think some people would like to do, which is get a bunch of policy makers and policy wonks in a budget hearing room, get out the [Congressional Budget Office] options book and cook up a bill."

Corry said the AARP hasn't ruled out policy options such as raising the Social Security retirement age, but the 30 million-strong advocacy group for the elderly clearly views the problem as eminently manageable within the current model. "There isn't a looming crisis," said Corry. The notion that Social Security is a ticking fiscal time bomb "is maybe convenient if you're trying to hot-wire some sort of solution, but we doubt the public is going to be spooked into something when they understand that it could lead to large increases in their taxes or large cuts in their benefits."

Corry said there may be room for some changes to Social Security, and noted that baby boomers and Generation X-ers talk a good game about taking greater personal responsibility for their retirement security. But he complains that outright privatizers "have been a little less than forthcoming about the transition costs" that would be required to pay promised benefits to retirees while moving to a system of private accounts. As for the Chilean system that Cato is so fond of: "With all due respect to the Chileans," said Corry, comparing the United States to Chile "is like comparing the Sistine Chapel to cave drawings."

At bottom, the debate about the future of Social Security is really about what sort of social contract the nation wants. "To totally privatize is really to say, `We really don't look at people in this country as spreading the risk and helping each other . . . you're on your own,' " said Martha McSteen, a former Social Security commissioner who now heads the National Committee to Preserve Social Security and Medicare, a 5.5 million-member advocacy group for the elderly. And privatizers, while often stressing that they want to retain a retirement safety net, don't necessarily disagree--they're all in favor of self-reliance. Why, they ask Americans, should the government insist on investing your money for you at a miserable rate of return, when you could do much better on your own?

Taking those disparate worldviews and turning them into a viable retirement policy won't be easy for lawmakers or private citizens. But Cato, the AFL-CIO and numerous interest groups in between will see to it that they get plenty of help making up their minds.

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`Not Just a Numbers Person'

Ben Wildavsky — Tue, 14 Oct 1997 00:00:00 -0400

Kenneth S. Apfel doesn't want to talk much yet about his own views on Social Security reform. But the new Social Security commissioner, who was sworn in at the mammoth agency's Baltimore headquarters on Sept. 29, is clear on one thing. "It is important to act quickly," he said in a recent interview.

"Social Security is not in crisis. However, if we take action soon, we can prevent a crisis from ever occurring." The "tough choices" required to counter the one-two punch of the baby boomers' approaching retirement and Americans' growing longevity will only become more difficult with time, he said.

Apfel is the first baby boomer to head the Social Security Administration. He turns 49 on Oct. 12 and has elderly parents and young children. Apfel says it is vital to lay the groundwork for change by educating the public about the long-term fiscal problems facing the program.

As a cautionary tale, he contrasts the passage of major Social Security reform legislation in 1983, after extensive public debate, with the disastrous public backlash against the 1988 law that provided catastrophic health care coverage for the elderly. Both were formative episodes for Apfel, who saw them up close during the more than 10 years he spent as a top aide to former Sen. Bill Bradley, D-N.J. "Catastrophic was more of an inside discussion, with very little deep public debate," he said. "What catastrophic taught me is that you have got to bring the American people into a debate before major change is acceptable."

Apfel left Bradley's staff in 1993 to become assistant Health and Human Services (HHS) secretary for management and budget, then joined the White House Office of Management and Budget in 1995 as associate director for human resources, a powerful behind-the-scenes position where he oversaw budgets, policy and management for the Social Security Administration, the Labor and Education Departments and portions of HHS and the Agriculture Department.

He was extensively involved in welfare reform. It was Apfel who made the final presentation to the President describing the contents of the welfare overhaul legislation when Clinton was deciding whether to sign the measure. Known as a strong liberal with a rigorous approach to policy analysis, he privately opposed the welfare reform bill, but now says he's pleased that many of the flaws he saw in the legislation were changed as part of this year's budget deal.

A tall, bearded man, who apologizes to an interviewer for not being "smoother," Apfel earns extremely warm reviews from subordinates. "Ken always retained not only the respect but, I think it is fair to say, the love of the people who worked below him," said OMB spokesman Lawrence J. Haas. This high regard is shared by former bosses as well. HHS Secretary Donna E. Shalala called Apfel "one of the most able policy analysts I've ever worked with." Former Sen. Bradley, through an aide, called Apfel "uniquely qualified" to head the 65,000-employee agency. And former White House chief of staff Leon E. Panetta said in a telephone interview that Apfel is noteworthy for the way he combines head and heart. "He not only has the expertise, but, I think more important than that, he has a sense of compassion about issues he's dealing with," said Panetta. "He's not just a numbers person."

Although better known for his policy skills than for his political work, Apfel nonetheless knows how to wield influence. During the final hours of appropriations negotiations in the fall of 1996, for example, he pushed for the Administration to attempt to delay the food-stamp cutoff contained in the welfare reform legislation the President had signed that summer.

"I said, '. . . I think this is a long shot,' " Panetta recalled. "But he said, 'Yeah, but it's worth a try.' "

Panetta put the proposal on the table. And to his surprise, he was able to persuade House Agriculture Committee chairman Pat Roberts, R-Kan., and House Speaker Newt Gingrich, R-Ga., to sign off on the change, which was included in the immigration reform measure that was attached to the appropriations bill.

Social Security commissioners in recent years have had much less influence over retirement policy than their predecessors had in the first few decades of the program. Apfel hopes to change that, partly by beefing up the agency's policy shop and partly by drawing on the expertise and connections he's built up in the jobs that have led him to his current post. "Will the Social Security Administration be a player in the policy debate? Absolutely," he said. "I've been part of the Clinton economic team for several years--that's going to continue."

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Shaking Up the IRS

Ben Wildavsky — Mon, 25 Aug 1997 00:00:00 -0400

Because the recently completed budget deal includes so many changes to the tax code, it's unlikely Congress will make major tax policy changes any time soon. But lawmakers do seem ready for some serious debate about shaking up the Internal Revenue Service.

A national commission on restructuring the IRS, co-chaired by Sen. Robert Kerrey, D-Neb., and Rep. Rob Portman, R-Ohio, in June recommended a series of changes, including placing the agency under the control of a new seven-member board rather than the Treasury Department. The Administration is strongly opposed to the idea.

Legislation to implement the commission's recommendations was introduced on Capitol Hill in July. There's already been one hearing on the Portman-Kerrey proposals before the House Ways and Means Committee, and L. Ari Fleischer, a spokesman for the committee's chairman, Rep. Bil Archer, R-Texas, says more hearings and possibly a markup will take place this fall.

An IRS restructuring bill could even be passed and sent to the President as early as March or April of 1998, Fleischer predicts. "Getting the IRS out of people's lives one step at a time," he says, "is a very important step toward the eventual goal of total tax reform."

But William G. Gale, a tax expert at the Brookings Institution, says the IRS is simply a convenient target. "One of the great ironies of all this is that one direction the debate goes is that now Congress will focus its attention on the IRS and claim that they're doing a poor job administering the tax system and neglect to mention the fact that the tax system is a holy mess precisely because of the laws that Congress has passed," says Gale. "The IRS is by no means a perfect agency, but having to administer this tax system, they're starting with one hand tied behind their back."

This article is excerpted from "A Hike in Complexity" from the August 23 issue of National Journal.

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Low Deficit, High Anxiety

Ben Wildavsky — Mon, 14 Jul 1997 00:00:00 -0400

bwildavsky@njdc.com

Now that many analysts believe the federal deficit will fall to $50 billion or less in fiscal 1997, budgeters on Capitol Hill and at the White House aren't eager to make the new deficit projections official any time soon. They fear that Members of Congress either will want to spend the new pot of money or will be reluctant to cast tough votes on budget balancing bills that may seem less necessary with the deficit already on the wane. Above all, they worry that their hard-sought budget deal could become--gasp!--irrelevant.

At a July 1 meeting in the offices of House Speaker Newt Gingrich, R-Ga., several of the Republican leadership aides and committee staff members in attendance brought up the scuttlebutt that higher-than-expected June tax receipts might lead forecasters to reduce their fiscal 1997 deficit estimate.

The Congressional Budget Office (CBO) had already revised this year's deficit forecast downward from $122 billion to $67 billion in May. That made it possible for negotiators to clinch the budget deal that month with less pain--or, some said, less real reform--than anticipated. Wouldn't it be great, the GOP aides wondered, if more manna was about to rain down from heaven?

Not so fast, replied Senate Budget Committee staff director G. William Hoagland and his House Budget Committee counterpart, Richard E. May. "I and Rick May both said: `No. Stop. Don't go down that path,' " Hoagland said in an interview. Neither of the budget bills passed by the House and the Senate cuts spending by as much as the budget deal calls for, he notes. "If there is any additional good news in the deficit estimate for 1997, we don't need to run out and spend that again or reduce our savings," Hoagland said, "because in some ways we've already taken advantage of it by not having done what we said we were going to do over the 10-year period."

The following day, at another meeting attended by Administration officials and top Democratic and Republican Hill aides, Hoagland asked Office of Management and Budget (OMB) director Franklin D. Raines when his agency might complete its "mid-session review," the deficit forecast normally due on July 15. With intense negotiations over the budget bills approaching, he told Raines, coming out with the projection on schedule would be "not that helpful" and might "confuse" the budget process.

The next day, Hoagland said, Raines's deputy Jacob J. (Jack) Lew called to say OMB officials agreed. An Administration official said both Clintonites and GOP leaders don't want to see the budget deal unravel because of good news on the deficit front.

OMB spokesman Lawrence J. Haas said that no final decision has been made on the release date of the Administration's deficit forecast, but that there's "general agreement that it would be more productive to do it after [budget] reconciliation, which we expect to have wrapped up by early August." The CBO's next forecast is also due in August, but Hoagland said it might not be released until September.

Of course, amid all the budgetary frenzy, it's also worth noting that some analysts caution that the latest revenue trends may not last.

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Pigging Out

National Journal and Ben Wildavsky — Thu, 24 Apr 1997 00:00:00 -0400

In the days following the Republican sweep of the 1994 congressional elections, some exuberant conservatives began writing obituaries for a venerable Capitol Hill institution: pork barrel spending. GOP revolutionaries bent on deficit reduction and returning power to the states would have little tolerance, they said, for the age-old practice of lawmakers pledging their support for key legislation in exchange for federally funded projects in their districts.

"Bringing home the bacon does not bring home the votes. `Pork barrel' politics is probably finished," declared Wall Street Journal editorialist John Fund in a November 1994 commentary for the San Diego Union-Tribune. "Conventional wisdom said all politics is local. Not this year," agreed conservative pundit Cal Thomas in his syndicated column.

Many GOP lawmakers had similarly high expectations. Rep. John Boehner, R-Ohio, declared that he and his fellow conservative firebrands were determined to put Congress on a pork-free diet. Asked if it might be tough to get Bud Shuster, R-Pa.--a world-class pork-meister who was about to become chairman of the House transportation panel--to follow the new regimen, Boehner didn't mince words. "I've got the votes to make it happen; he doesn't," he told The Pittsburgh Post-Gazette.

It's no accident that Boehner was quizzed about Shuster and his committee. Transportation spending has long been synonymous with pork barrel politics. For Members of Congress, bringing home money for local roads, bridges and rail systems has been a surefire way to show that they can deliver tangible benefits from Washington. And some postelection cynics in 1994 took the view that this tradition wasn't likely to die--GOP revolution or not.

When the Republicans in late 1994 set about renaming House committees, the Capitol Hill newspaper Roll Call ran a whimsical chart suggesting new monikers that each party might prefer. The Ways and Means Committee, for instance, would become the "Committee on Revenues and Hard Work" under the Republicans--and the "Committee on Taxes and Welfare" if the Democrats had their druthers. Just one panel, the paper said, would have the same name under either party: the Public Works and Transportation Committee would remain the "Committee on Pork."

Two and a half years later, it looks as though the cynics were right.

Although Shuster's panel indeed got a new name--it's now the Transportation and Infrastructure Committee--its hallmark activity hasn't changed. The panel this year has grown to 73 members, which makes it the biggest congressional committee in history. And there's little mystery behind all the newfound interest in transportation policy: a mammoth six-year surface transportation bill is due for reauthorization this year. With as much as $175 billion up for grabs, practically every House Member--including many of those GOP revolutionaries--is scrambling to get a piece of the action.

Every Member "has a road or a bridge or a highway somewhere that their constituents are clamoring for, and they recognize that the easiest way to get their project in the bill is to get on the committee," noted Ray LaHood, R-Ill., a member of the Class of 1994 who sits on the transportation panel. He predicted that the reauthorization of the 1991 Intermodal Surface Transportation Efficiency Act (ISTEA) "will be the biggest pork-producing bill in the 105th Congress."

AN OPENING FOR PET PROJECTS

In an era when both parties have dedicated themselves to budget balancing, the ISTEA (pronounced iced tea) reauthorization provides one of a shrinking number of opportunities for legislators to spend money the way that they could during the glory days of federal largesse. The bill is likely to authorize spending over five or six years, and is the largest nondefense discretionary spending measure on which this Congress will vote.

The bulk of federal road and transit funds, which are raised through gasoline taxes, is distributed to the states through a complex formula that is contained in the ISTEA legislation. The prospect that the formula might be revised has pitted state against state in a frenzy of lobbying and congressional acrimony. There's also plenty of debate between environmentalists, road builders and transit advocates over how the money that goes to the states should be spent.

Mostly overshadowed by this struggle over broad spending priorities and transportation policy is the less public--but no less intense--scramble by Members for individual projects. In the 1991 ISTEA bill, 538 local projects were authorized, at a cost of $6.2 billion, or about 4 per cent of the measure's $156 billion price tag.

These Member-requested programs are often called demonstration projects, a name that dates back to the time when funding requests were justified on the ground that a particular federally backed project would "demonstrate" some new construction technique.

These demonstration projects have been harshly criticized by, among other analysts, the General Accounting Office, the Congressional Research Service, state transportation departments and anti-government-waste groups. By directly financing local projects, critics say, Congress end-runs the state and regional planning process--and often spends federal highway dollars on undertakings that aren't state priorities and are sometimes of dubious value.

The Clinton Administration is on record against demonstration projects; its proposal to reauthorize the surface transportation bill doesn't include any money for Member requests. Most Senators say they oppose projects, too (although the Senate managed to snag close to 100 of the 538 projects in the 1991 bill). Senators generally focus most on statewide transportation issues--namely how much money their states will receive through the highway funding formula used to distribute gas tax revenues.

There's some opposition to demonstration projects on the House side as well. The Budget Committee reports accompanying the chamber's last two budget resolutions called for doing away with such spending. "Earmarking circumvents the planning process by allocating funds on a political, not economic basis," last year's report said.

Nevertheless, Republicans and Democrats alike are now lining up at the trough. After putting out a call for proposals, the Transportation and Infrastructure Committee says it has received nearly 1,500 project requests from about 90 percent of House Members.

That record number of earmark requests--about 1,100 proposals were submitted in 1991--would have a price tag of somewhere between $150 billion and $300 billion, according to recent remarks by Rep. Thomas E. Petri, R-Wis. Petri, chairman of the panel's Surface Transportation Subcommittee, has emphasized that only a fraction of the requests will make the cut.

To be sure, some House GOP deficit hawks and anti-pork crusaders, including Budget Committee chairman John R. Kasich of Ohio, Ways and Means Committee chairman Bill Archer of Texas and Boehner, who chairs the House Republican Conference, have stayed true to the party line and submitted no project requests. But the vast majority of their Republican colleagues, from rank-and-filers up to such leaders as Majority Whip Tom D. DeLay of Texas, have put in their bids for federal dollars for their districts.

Whether they're asking for $107 million for a light-rail project (Ronald C. Packard, R-Calif.), $28.8 million for a highway interchange (Jennifer B. Dunn, R-Wash.) or $18.7 million for enhancements to the Baltimore-Washington Parkway (Bob Ehrlich, R-Md.), these lawmakers seem to have taken to heart Shuster's oft-cited adage that there's no such thing as a Republican or a Democratic bridge or airport.

HARD HABIT TO KICK

So were would-be Republican reformers such as Boehner a little hasty when they predicted that they could out-vote old-line GOP stalwarts such as Shuster? "The facts speak for themselves," Shuster said in an April 9 interview. "There's overwhelming support for the projects."

LaHood explains it by saying that Republican revolutionaries have "sort of developed amnesia from the time they were elected.

"They're facing political reality, and the political reality is that roads provide jobs," he continued. "They're going to be in there up to their elbows along with everybody else." LaHood, a moderate who didn't sign the Contract With America, makes no apologies for the $220 million in requests he's submitted for a range of projects, including a four-lane interstate highway between his Peoria district and Chicago.

Boehner now acknowledges that his 1994 optimism was premature. "Old practices die hard," he said in an interview. "I continue to believe that this is a practice that the Congress should not engage in." Rather than requesting funding in the new transportation bill, he's pushing projects in his district through the regular state and regional planning process.

Still, Boehner maintained that Republicans have reined in some pork barrel spending. "If you look at appropriations bills, they're not nearly as full of these things as they used to be," he said. Taking a broad view, he noted, "One of the things we've learned over the last two years is that all of these reforms that we want are not going to happen overnight."

So now that it's the Republican majority's turn to shepherd through the transportation bill, will there be any scaling-back of highway and transit pork? "I'd like to be more optimistic than I am," Boehner replies.

Indeed, even some of the House GOP dissidents who recently chastised their leadership for allegedly deviating from bedrock conservative principles are lining up with project requests.

Matt Salmon, R-Ariz., was one of 11 fiscal conservatives--10 of them members of the Class of 1994--who initially blocked a committee financing resolution on the House floor in March, saying that the amount appropriated to run the panels didn't reflect GOP belt-tightening principles. Yet a month earlier, Salmon had submitted a $130 million request for a light-rail system in his district.

Shuster was displeased that Salmon bucked the leadership on the committee financing resolution, according to an Arizona Republic report, and that Salmon earlier had voted against an extension of the airline ticket tax. As a result, the Transportation Committee was likely to derail Salmon's light-rail request, the paper said.

Using local projects for political reward or retribution would certainly be nothing new. But Shuster called the paper's anonymously sourced claim "an outright lie" and maintained that he wasn't aware of how Salmon voted on the ticket tax. "We'll consider all these projects on their merits," he added.

Salmon, in an April 7 letter to Roll Call, said Shuster hadn't threatened him with retribution. He said he'd prefer that federal transportation funding be "devolved" to the states--a proposal championed by Kasich and Sen. Connie Mack III, R-Fla., and loathed by Shuster. Salmon also said, however, that he's "confident" his project will be funded if that doesn't happen.

A number of the Republicans lining up for projects appear to be followers of the pork barrel philosophy of Sen. Phil Gramm, R-Texas.

Gramm has frequently noted over the years that he'll oppose federal projects that he thinks are ill-advised. He'd vote against, say, building a cheese factory on the moon. "But if we decided to do it, I would want a Texas firm to do the engineering," he has said, and "I would want to use milk from Texas cows."

Another of the 11 GOP dissidents, Rep. Peter Hoekstra of Michigan, stresses that "we're trying to change the system." He, too, supports the concept of letting states alone decide how to spend highway dollars raised through the gas tax. "But if the process that our own Republican leadership has put in place says we're going to identify projects here in Washington--we all have needs," Hoekstra said. "And just because you don't agree with the process doesn't mean you don't have needs."

Hoekstra, who has submitted a wish list that includes several highway projects for his district, denies that he's abandoned his federalist principles. "I don't think we should be deciding school lunches in Washington," he said. "Does that mean kids in my district can't get school lunches anymore?"

Other Members, such as Rep. Rob Portman, R-Ohio, argue that their pork is leaner and healthier than what most others are requesting.

Portman--who told the Cincinnati Enquirer after the 1994 election that "there are ways to help Ohio other than bringing in projects"--has joined Rep. Jim Bunning, R-Ky., in requesting $380 million for transportation improvements along the Interstate 71 corridor, which runs through Greater Cincinnati and Northern Kentucky. So how's Portman distinguishing himself from the pack? He's asking for a 50-50 federal-local funding split, rather than the customary 80-20 division.

THE BILL'S POLITICAL "GLUE"

For all the controversy that's surrounded demonstration projects, Shuster says critics are missing the forest for the trees. "ISTEA is not fundamentally about the projects," he insists. "ISTEA is about getting the funding necessary to ensure America's infrastructure future."

Shuster, recall, once said that his most significant accomplishment in the 102nd Congress was passage of the 1991 ISTEA bill. He has said he is proud that Pennsylvania in that legislation got $934 million in new projects, more than any other state, including $287 million for 13 projects in his district.

Shuster, who prefers to use the term "high-priority projects" to describe Members' requests, maintains that he's not paying all that much attention to the latest wish lists. "The projects are not a high priority of mine," he said. "The House can work its will on that. There's overwhelming support . . . so I'm sure it will."

Shuster says he's far more concerned about advancing longtime goals of his own--moving the federal highway trust fund off-budget and shifting a 4.3 cents-per-gallon portion of the federal fuel tax from general revenues to the trust fund. Both measures would lead to vastly increased transportation spending.

But even though projects will once again make up a relatively small slice of this year's bill--Shuster says they're unlikely to exceed 4 or 5 per cent of the total authorization--some analysts say that their political importance can't be underestimated.

"The projects are the glue that's going to hold the damn thing together," a highway lobbyist said. "You're not going to get 218 votes out of the House without them. You get people who will do what you tell them, if you promise them the projects." A former state transportation official concurred. "I've always taken the point of view that every business has some overhead," he said. "If that's what it costs to get a significant or a good highway bill, it's worth the price."

In an effort to address past criticisms, the Transportation Committee has instituted a 14-point checklist designed to vet Members' proposals. It asks whether a project has the support of state or regional transportation officials, whether it is eligible for federal matching funds (some past projects weren't), whether it has national or regional significance, and so on. "These projects have to pass muster to be considered," Shuster said.

But many state officials--who often play the game of realpolitik by holding their noses and supporting Member-backed projects--don't believe that the new checklists will do much to change the dynamic of the project allocation process.

Shuster "needs to generate fealty," said Carl B. Williams, deputy secretary for transportation in California's business, transportation and housing agency. "He has absolutely no interest in asking a state what the state wants. The only people he needs to bring to his way of thinking about passing the bill are the people who can vote on it."

California hasn't formally backed any highway or transit projects submitted by members of its congressional delegation, Williams said. "Gov. Wilson hates them, absolutely hates them," he said of the earmarks.

Many Members take pains to point out that the items on their latest wish lists also appear in state transportation plans. But even when that's true, Williams and others say, Members inevitably circumvent the state and local planning process by moving their pet projects to the front of the line. Indeed, if Members weren't wielding influence, there wouldn't be any point in getting involved in the first place, Williams said. Legislators don't score political points for delivering projects that were going to be built anyway.

Shuster observes that states already control the vast majority of highway and transit spending, and suggests they're being greedy. "They want to make all these decisions," he said. "We only have 5 percent. And we're the ones who are casting the tough votes, to raise the money and provide the funding and develop the program. And if a Member of Congress doesn't really know what's important in his district, he isn't going to be a Member of Congress very long."

As popular as demonstration projects remain, there's a major budgetary stumbling block that could make it tough for the Transportation Committee to lard this year's ISTEA reauthorization bill with earmarks. The Office of Management and Budget (OMB) has changed its budget rules for highway projects in a way that now treats both contract authority and outlays as mandatory spending. The 1991 ISTEA bill exempted earmarked projects from annual spending limitations. The OMB change means that under the "pay-go" rules of the 1990 Budget Enforcement Act, if the Transportation Committee wants to exempt demonstration projects once again, it must come up with offsetting cuts in other mandatory categories.

Very few Members appear to be aware of the potential OMB roadblock, a Budget Committee aide said. But the Transportation Committee leadership certainly is. In a letter to OMB director Franklin D. Raines on Feb. 24, Shuster, Petri and their Democratic counterparts, James L. Oberstar of Minnesota and Nick Joe Rahall II of West Virginia, asked that the change be reversed. OMB, they complained, "is seeking to reduce funding for highway programs through an accounting sleight-of-hand, rather than openly, through the legislative process."

Before a recent court ruling, some experts questioned whether the President could use the new line-item veto authority to strike items that he doesn't care for--including earmarked projects--from the transportation bill. But that's off the table for now. A federal judge on April 10 called the line-item veto unconstitutional, although a higher court could eventually overturn that ruling.

Whatever happens this year, the healthy appetite for pork demonstrated by many GOP lawmakers is proof that, notwithstanding the best-laid plans of reformers, the Capitol Hill tradition of bringing home the bacon isn't going away any time soon.

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Agriculture, Business And Financial Affairs: Potential GOP Targets

Sat, 16 Nov 1996 00:00:00 -0500

AGRICULTURE DEPARTMENT

griculture Secretary Glickman has his job as long as he wants it. Just under two years in the post, Glickman, a former Democratic House Member from Kansas, has put down deep roots.

Unlike his boss in the Oval Office, he's extremely popular in the Farmbelt. Glickman has already said that he will attempt to make the most of his standing and push Congress to modify the 1996 Freedom to Farm bill that Clinton said he signed ``with reluctance'' because it leaves farmers without a safety net when prices bottom out.

In a Nov. 7 speech in Washington, Glickman said that, among other changes, he would ask Congress to loosen the new law's restrictions that, he said, can deny creditworthy farmers access to government-backed farm assistance. Noting that many farmers fret about being able to hold their own in the international marketplace, Glickman said his department will develop new risk management tools to help farmers stabilize their income in the new global economy.

Meanwhile, running a sprawling department that's often cited as a model of bureaucratic inefficiency will be a challenge.

Ellen Haas, the undersecretary for food, nutrition and consumer services who is responsible for the food stamp and other nutrition programs, has come under fire from critics on and off Capitol Hill. Congressional Republicans have complained about her management practices. School lunch advocates assert that she focuses too much on the goal of reducing fat in children's diets at the expense of other priority issues.

The U.S. Forest Service, which manages millions of acres of federal land and has more employees than any other Agriculture Department division, will continue to cause Glickman headaches. Timber companies and environmental activists have been virtually at war in the Pacific Northwest. Jack Ward Thomas, chief of the Forest Service, announced shortly before Election Day that he planned to step down. Separately, undersecretary for farm and foreign agricultural services Eugene Moos has said he's leaving. Glickman has asked his own deputy, Richard E. Rominger, a California farmer, to stay on the job.

COMMERCE DEPARTMENT

There wasn't nearly as much talk of dismantling the Commerce Department in the second year of the 104th Congress as there was in the first. And congressional Republicans are presumably even less likely to target the behemoth agency as the new Congress gets under way. Still, the fund-raising activities of former Commerce official John Huang could keep the department's activities--in particular its foreign trade missions--under close scrutiny.

A possible successor to outgoing Secretary Kantor is Chicago lawyer and Democratic operative William M. Daley (the Chicago mayor's younger brother), who's also talked about as a candidate for other Cabinet positions. Another possibility: former White House chief of staff Thomas F. (Mack) McLarty III, whose name has long been mentioned for the Commerce job. McLarty helped organize the 1994 Summit of the Americas in Miami. ``He has an awfully good relationship with the business community,'' a lawyer who's close to the Administration said.

Commerce undersecretary for international trade Stuart E. Eizenstat might seem to be a logical candidate for promotion. But despite his substantial trade expertise and years of government service, he's clashed with Kantor, whose views are likely to influence the President. Other names in play for the Commerce slot include Rep. Bill Richardson, D-N.M., and Democratic fund raiser Terence R. McAuliffe.

ENERGY DEPARTMENT

As the Administration weighs possible successors to Energy Secretary O'Leary, one of the trickiest questions is whether Republican conservatives in Congress will renew their crusade to dismantle her department. ``If Clinton wants to keep the department, he needs someone up there in a position to defend it,'' a well-placed energy industry lobbyist said. If the President is not enthusiastic about retaining the department, the lobbyist continued, he may delay nominating a replacement for O'Leary.

Industry insiders and some Members of Congress would like to see deputy secretary Charles B. Curtis get the top job. Curtis's resume includes a stint as chairman of the Federal Energy Regulatory Commission and as a Capitol Hill staff specialist on energy issues.

Others being mentioned for the job include former White House chief of staff McLarty; Rep. Richardson; Colorado Gov. Romer and Timothy E. Wirth, the State Department's undersecretary for global affairs. Environmental Protection Agency (EPA) administrator Carol Browner, whose name has also been floated for the post, has told associates that she doesn't want the Energy job.

Almost from the start, O'Leary made clear her intent to leave after four years. But even if she hadn't, White House officials would certainly have pushed her toward the door. During her first two years, O'Leary, the first black woman to hold the top Energy job, was praised for permitting public access to department files on secret radiation testing conducted by the Atomic Energy Commission during the Cold War. But for much of the past two years, sparks have been flying. The department has been frequently zapped for spending millions on questionable international trade missions and for hiring a public relations consulting firm to identify its ``enemies.''

Assuming it remains open for business, the department will soon be squarely in the middle of a building political and policy struggle over competition in America's electric utility industry. The next two years will also be a critical time for the nation's nuclear waste disposal program. Under a July court ruling, the federal government has until 1998 to take possession of the commercial nuclear waste now piling up at 110 nuclear power plants; a repository under construction in the Nevada desert won't be completed by then.

LABOR DEPARTMENT

He loved the job, and the public image that came with it--the little guy standing up for the little guy. But after a year of commuting to Boston, where his wife and their two teenagers live, Labor Secretary Reich has decided to take permanent family leave to enjoy his sons' last years at home. ``You can't make an appointment with a teenager,'' he said in an interview. He plans to serve through the January inauguration.

He'll be a tough act to follow. During his tenure, Reich effectively converted his department from a parochial backwater for a dwindling interest group into a bully pulpit for articulating the concerns of downwardly mobile workers.

Centrists in the Administration ground their teeth when the liberal former Harvard professor lectured big business about its social responsibilities, and deficit hawks nixed his plan for using payroll taxes to pay for worker training. But Reich proved his value to the President, an old friend and fellow Rhodes scholar, by gaining loyalty from labor unions initially wary of the Administration, winning a few key legislative battles--chiefly the minimum-wage hike--and by supplying Clinton with some of the popular education themes and programs of his campaign for a second term.

Possible replacements include White House director of public liaison Alexis M. Herman, a former director of the Labor Department's Women's Bureau, and former Sen. Harris Wofford, D-Pa., former Pennsylvania labor commissioner who now heads the federal AmeriCorps program.

But the same rumor mill contends that Herman, who has developed better ties to the business community than to unions, may not be Cabinet material and is needed where she is. Wofford's old-guard liberal credentials may not help the President redefine himself as the centrist for the 21st century.

Whatever else Reich's successor chooses to do, he or she will be charged with trying to shepherd through the Congress some of the President's already-announced initiatives. These include the option of compensatory time instead of overtime pay for hourly workers; expanded family and parental leave to allow parents to attend a child's school conferences or doctor's appointments; a health insurance program for the unemployed; and college tuition tax subsidies. The Labor Secretary will also co-chair the President's announced council on health care quality and consumer protection.

TRANSPORTATION DEPARTMENT

With the departure of Transportation Secretary Pena, the front-runner for the job is probably Chicago lawyer Daley, who came close to getting the slot in Clinton's first term. Other possibilities include Rodney E. Slater, head of the Federal Highway Administration and an old Arkansas buddy of Clinton's who once ran the Arkansas Highway Commission; former Virginia governor Gerald Baliles, who headed the President's 1993 Commission for a Safe and Competitive Airline Industry and has also lobbied heavily on behalf of U.S. airlines seeking access to routes to Japan; former U.S. Ambassador to Canada James J. Blanchard; and Acting U.S. Trade Representative (USTR) Charlene Barshefsky.

Several other Transportation Department seats will need to be filled as well. Federal Aviation Administration (FAA) chief David R. Hinson has announced that he's stepping down. His deputy, Linda Hall Daschle (wife of Senate Minority Leader Thomas A. Daschle, D-S.D.) will serve as acting administrator, but she reportedly doesn't intend to stay around either.

Whoever ends up in the top Transportation slot is likely to be busy. The so-called ISTEA (pronounced iced tea) bill (the 1991 Intermodal Surface Transportation Efficiency Act, which determines how federal transportation money is doled out) is up for reauthorization. Thorny international aviation disputes with Great Britain and Japan also remain to be resolved, not to mention a trucking fight with Mexico. At the FAA, one of the biggest issues facing the agency will very likely be its own finances: The White House is pushing to finance the agency's activities through a new user fee.

U.S. TRADE REPRESENTATIVE'S OFFICE

There's still a question mark over Barshefsky's future. A stalwart of the Washington trade bar, she is widely admired by Democrats and Republicans alike as a tough negotiator with a formidable grasp of trade policy. But her past legal work for the Canadian government, depending on how it is interpreted, may fall afoul of a new lobbying law that bars anyone who's represented foreign governments in trade disputes with the United States from top trade posts.

The latest indications are that Barshefsky would like to stay and that the Administration will send her nomination to the Senate Finance Committee. The White House may argue that Barshefsky isn't covered by the law because the case in which she advised the Canadian government wasn't really a trade dispute. It was a countervailing duty case, involving allegations of unfair government subsidies to the Canadian timber industry, in which the U.S. Commerce Department is--at least on paper--supposed to play a quasi-judicial rather than an adversary role.

But although Finance Committee chairman William V. Roth Jr., R-Del., is likely to give Barshefsky a sympathetic reception, some of her boosters fear that the case in her favor, while maybe legally valid, risks sounding like an effort to circumvent the broad and untested new lobbying law. In the post-John Huang era, some trade hands worry that the knives will be out on Capitol Hill for any policy or personnel decisions that raise the specter of foreign influence in U.S. decision making.

If Barshefsky doesn't get the nod (there's talk she might end up as Transportation Secretary), Chicago's Daley is a strong possibility. Daley helped the Administration pass the North American Free Trade Agreement and has provided valuable political support in Illinois. ``He's probably owed more than anybody,'' a trade lobbyist said. Other names being floated for the top trade job: deputy national security adviser Samuel R. (Sandy) Berger and former Oklahoma Rep. and U.S. Ambassador to Mexico James R. Jones.

Robert D. Kyle, a trade specialist with a joint appointment at the National Economic Council and the National Security Council (NEC), is being mentioned as a potential deputy USTR. ``He's a strong candidate for any sub-Cabinet job in the international economic area,'' including slots at Treasury or Commerce, an Administration source said.

The immediate issue facing the next USTR will be extending ``fast-track'' trade negotiating authority. After that--and looming larger than any other trade issue--will be the question of trade relations with China.

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Fiscal and Economic Policy: Making Ends Meet Won't Be Easy

Julie Kosterlitz, National Journal, Ben Wildavsky, and Jeff Shear — Sat, 16 Nov 1996 00:00:00 -0500

TREASURY DEPARTMENT

aving ridden into his second term in large part on the strength of the national economy, Clinton was hardly likely to dump Secretary Rubin.

Rubin, the low-key former investment banker who was, early in the President's first term, head of the NEC, has won points for keeping the Administration focused on deficit reduction and for his adroit handling of various potential crises, from a falling dollar to the Mexican bailout. When House Republicans refused to raise the debt limit to pressure Clinton during last year's budget standoff, Rubin's deft maneuvering allowed the government to keep paying its bills anyway, and to keep the presssure on the House.

Rubin wants to stick around for the entitlement reforms he considers key to continued deficit reduction, and to prove the economic Cassandras wrong about an impending recession. He'll also focus on pet projects: finding new ways to channel capital to inner cities, rolling out his promised new inflation-indexed bonds and using the bully pulpit to exhort spendthrift Americans to save more.

NATIONAL ECONOMIC COUNCIL

With director Laura D'Andrea Tyson headed back to Berkeley, Calif., some analysts say the NEC is at a crossroads. The council is supposed to coordinate the Administration's economic policy making, and Tyson's critics faulted her for not doing enough to prevent end runs to the President by Cabinet members.

``The President has to decide, does he want the NEC to be restored to the role it had in its first two years under [Treasury Secretary and former NEC head] Rubin?'' a trade lobbyist said. ``That is not a question of structure, that's a question of personality and the perception of who is head of it.''

Candidates to replace Tyson include deputy national security adviser Berger and Tyson's two deputies: Gene B. Sperling and Daniel K. Tarullo. Still another name that's been bandied about for the top NEC slot: Princeton University economist Alan S. Blinder, former vice chairman of the Federal Reserve and a onetime colleague of Tyson's on Clinton's Council of Economic Advisers (CEA). Along with good managerial skills, Blinder would bring a track record as an economic popularizer--he once wrote a monthly column for Business Week. But he's not a political heavy-hitter, which some argue is a vital quality for anyone who wants the NEC to have a central role in policy making. If CEA chairman Joseph E. Stiglitz moves on, Blinder could well be a candidate for that job.

OFFICE OF MANAGEMENT AND BUDGET

By all appearances, OMB is a happier place these days. That's because for the first time since the beginning of the Administration, Panetta is out of the picture. Though much admired, the former OMB director and White House chief of staff was first and foremost a political animal. And that, some at OMB thought, got in the way of a budget agreement.

Franklin D. Raines, who in September was confirmed as OMB's latest director, ``is re-energizing the place,'' an analyst who's familiar with the agency's operation said. Not that Raines's immediate predecessor, Alice M. Rivlin, wasn't highly regarded and capable. But she always had Panetta looking over her shoulder and negotiating for her. ``Leon is a brilliant budgeter, but he's a politician,'' the source said. Raines, a former vice chairman of the Federal National Mortgage Association and an OMB figure during the Carter Administration, has already called for early budget talks involving both ends of Pennsylvania Avenue.

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GOP to the Press: Drop Dead

Ben Wildavsky — Wed, 14 Aug 1996 00:00:00 -0400

Lucille Pershing, a California delegate to the Republican National Convention, doesn't mince words when a reporter asks what she thinks of the media hordes gathered in San Diego this week.

``I think they're scorpions, just like they say in Primary Colors,'' said Pershing, referring to the best-selling Washington novel. ``They're just very biased. They don't give our point of view. There are so few that are Republicans. Wasn't there a poll that said 86 per cent voted for Clinton? That tells you right there.''

Never mind that Primary Colors is about the presidential campaign of a Clintonesque candidate, and that it's Democratic campaign operatives in the book who call the press corps ``scorps.'' Pershing's sentiment is easy enough to understand-- and it's widely shared by her fellow delegates. In a series of interviews on and off the convention floor, GOP loyalists spelled out in chapter and verse why it is that Republicans loathe the press.

Like Pershing, many delegates triumphantly cite a recent survey of Washington reporters conducted for the nonpartisan Freedom Forum--which found that 89 per cent of respondents had voted for Clinton. And many can tick off examples of reporting that doesn't meet GOP standards. They think the record of the 104th Congress has been distorted. They complain that news accounts frequently refer to Republican cutbacks in government programs, when outlays have in fact increased. They feel the press is out to get them.

Once upon a time, said 62-year-old delegate Gwendolyn Hicks of Hendersonville, N.C., who runs a mobile home park with her husband, the press was ``very open-minded'' and simply reported what it saw. Today, she said, ``you go to a political meeting of any kind, and you listen to it, and then the next morning you pick up the paper and you say, `Were they at the same meeting I was at?' because it had a whole different slant to it.''

Pershing, a widowed retiree, said she doesn't expect reporters ``to hew to our line.'' But, she complained, ``instead of giving the news, quite often they give their commentary in the news section. That should be on the op-ed page.''

Some delegates feel they get a fairer shake from their hometown reporters than from the top guns of the national press corps. ``I think the local media is by and large fair and objective, but I think when you get to the major news outlets-- opinion leaders like The New York Times and Washington Post--I think there's an extreme double standard,'' said Texas delegate Ernest Angelo Jr., a petroleum engineer who serves as a Republican National Committeeman.

The GOP faithful gathered here are remarkably friendly, even as they describe the media's manifold sins. Many hasten to assure an inquiring reporter that their criticism is nothing personal. In fact, they're tickled to be interviewed--Hicks's husband took a snapshot of her with a reporter's tape recorder catching her every word.

``Each of the reporters that I have met personally were very nice people,'' said Liz Schofield of Clinton, Iowa. ``But I believe, whatever we said, by the time it was edited by whoever's in charge, it didn't reflect what was said.''

Schofield, who has chaired several county-level GOP campaigns, was wearing red-white-and-blue sneakers along with similarly patriotic shorts and top, hair ribbons, blue-and-silver body glitter and a cowboy hat bearing the words ``Republicans for Life.''

The press, she said, ``tries to slant things and uses words to change the actual meaning of what's going on.'' By way of example, the Christian Coalition activist cited the media's use of the term ``anti-abortion'' rather than ``pro-life,'' which she called more ``positive.'' Some Republicans take an old- fashioned approach to news media reports they dislike: abstinence.

``I don't read the paper in the morning or the evening, and I only look at the news in the afternoon,'' said delegate Bill Cleveland, a black Alexandria (Va.) city councilman. As a result, he said, ``I've found I don't have bad dreams.''

Cleveland's number one example of the media's tendency to accentuate the negative? He once heard a TV reporter describe a survey on racism in which 19 per cent of whites said they had a negative view of blacks. ``But if you turn that on its head, 81 per cent of white people don't view it that way,'' he said. ``[The media] want 100 per cent, and you can't get that.''

Cleveland's media-avoidance seems to be the exception. Many delegates said they are news junkies, reading several newspapers and watching CNN, C-SPAN and network news. At the same time, like other conservatives around the nation, they're increasingly looking for alternative news outlets.

Schofield, for instance, said she turns for information to groups such as the Christian Coalition, Republicans for Life and the Rutherford Institute. ``They're giving us the real truth about what's going on, because we can't get that when we sit down and watch television.''

Hicks agrees: ``We're going to have to bypass the major networks and CNN, too.''

As it happens, the journalist who authored the much- disseminated Freedom Forum study during a recent fellowship doesn't believe it proves reporters are natural-born GOP bashers. ``The political leanings of reporters are irrelevant because most reporters are rooting all the time for the best story,'' maintains Elaine S. Povich, a congressional reporter for Long Island-based Newsday (which, like National Journal and Government Executive, is owned by the Times Mirror Co.).

``If the current polls are correct and Bob Dole is in fact closing the gap on Bill Clinton, reporters everywhere will cheer, because this is a better story,'' said Povich. ``Our goal is news, and the tighter the race, the better the news, the more I get on page one.''

But delegates remain convinced that reporters harbor political biases to which they simply won't 'fess up. They have little doubt that reporters are looking for more than a good story.

Most delegates seem resigned to being at odds with the media, seeking solace in Rush Limbaugh broadcasts and frequent letters to the editor. Angelo said the American public has shown its ability to ``see through the fog.'' For this Republican partisan, however, the press ``does make our job a lot more difficult.''

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