Cutting the Federal Budget to Prevent U.S. Bankruptcy: Part III – Cutting Out HUD, NASA and Other Losers

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by Jim Grichar (aka Exx-Gman) by Jim Grichar

(Author's note: I ask readers for their indulgence because of my extensive use of the b-lingo – bureaucrat-lingo – and the detail I used in presenting my arguments. I do this to reduce bureaucratic counter-arguments – which I expect to receive – to the absurdity that they invariably are.)

For those who did not read Part I–II of this series, total actual cuts in proposed spending (what I call the "Cut-o-meter') amounted to $155 billion below the current, that is 2004, fiscal year. All of that total came out of the national security area, or defense.

Domestic spending, accounting for about three-fourths of the federal budget, is ripe for cutting.

In a previous article, I argued for abolishing the National Aeronautics and Space Administration (NASA). The civilian space program is a 21st century version of Franklin Roosevelt's Works Progress Administration (WPA) program, a boondoggle that provides employment on useless projects. It is nothing more than high-class welfare for scientists and engineers and the domestic aerospace industry.

The space shuttle is a disaster, having led to the deaths of 14 astronauts. It costs too much to use it to launch payloads into space, and over its more than 20 year life, it has been proven to be unreliable. Cheaper, unmanned vehicles are more useful and reliable for putting payloads into orbit. In a move that reveals the multibillion-dollar boondoggle status of the international space station, the Bush Administration is proposing that U.S. funding of it be ended in the near future, and, with savings from the proposed termination of the space shuttle and some additional funds (yet to be specified, of course), that the U.S. once again put astronauts on the moon and eventually send manned expeditions to Mars. This plan, if funded, would probably raise NASA's budget to the $50 billion annual level from the proposed $16.4 billion for fiscal year (fy in the b-lingo) 2005.

As several astute readers commented to me after my earlier article on NASA, there are many private ventures that will eventually – sooner, if not later – offer manned space flight in a commercially profitable manner, doing a much better job and for a lot less money than NASA.

And on April 7, 2004, the Federal Aviation Administration gave the first license for a privately launched space vehicle to fly to the edge of space, 60 miles up. This is part of a contest to get a $10-million prize (known as the X prize) for the first privately launched space craft that can reach at least an altitude of 62.5 miles and do this twice within a two week period. Dick Rutan, one of the designers and pilots of the Voyager – which flew nonstop and unrefueled around the world in 1986 – is a member of the firm getting the FAA approval. Several other firms are also expected to enter the contest soon. In any case, Rutan predicts that within 10 years ordinary people will be able to purchase, for the cost of a cruise on a luxury liner, a flight into space.

In addition, NASA spends lots of money on putting satellites into space for various scientific reasons. However, all of that effort could be funded by the private sector-based philanthropic foundations instead of the public.

Thus, by fy 2008, NASA would be history, saving the public at least the $16.4 billion by then. Savings over the actual spending in 2004 would be $14.6 billion, raising the Cut-o-meter savings total to almost $170 billion.

The Waste of HUD

The Department of Housing and Urban Development (HUD) is a half-baked mixture of political slush funds under the cover of welfare. For fy 2005, HUD's proposed outlays are $38.9 billion, of which $22.2 billion is for public and Indian housing, $3.7 billion for payments to public housing authorities for services, $3.6 billion for payments to public housing authorities for managing public housing, $5.6 billion for other community development projects, and $3–4 billion more for other projects. The Bush Administration actually proposes cuts of over $7 billion in the HUD budget over the current year, in which $46.2 billion will be spent.

Much of the money goes for subsidies of one sort or another to landlords for rent under what is called section 8 housing. In major cities, some recipients are getting the equivalent of $1,700–1,800 per month in rent subsidies. And this still takes place despite the so-called welfare reform law of 1996. Of course, like other federal programs, there is room for the usual waste, fraud, and abuse. Recently, in San Francisco, a number of employees of that city's housing authority were convicted in federal court for taking bribes from renters who would not otherwise qualify for HUD-funded section 8 rental subsidies. And this is likely to be just the tip of the iceberg. Landlords also love this deal, as they can earn terrific rates of return on real estate investments, much higher than they could earn renting to tenants who do not get subsidies. In some regions, this program has shrunk the housing supply to those who have to work for a living and instead subsidized those who do not work part-time or full-time for a living.

Anyone who remembers Lyndon Johnson's Great Society programs, including "Model Cities," a HUD-funded grant program that poured out the funds to politically-connected mayors, knows that this graft-ridden program has only morphed into different ones, such as community development grants, etc.

Like other departments, HUD is loaded with programs that can be cut. Having to earn one's rent is a great way to get people to go back to work and get off welfare. Thus, the HUD budget should be cut at least by one-third, saving about $13 billion per year by fy 2008 from the proposed fy 2005 level and about $12 billion per year from the projected fy 2008 level. If made, these cuts would put the HUD fy 2008 budget at about $24.3 billion, well below the actual current level of $46.2 billion. Add $21.9 billion in actual savings to the Cut-o-meter!

Eventually, the whole department should be abolished, saving another $24+ billion per year.

Some Other Cuts

There are loads of independent agencies in the federal government, but here are a few that should be abolished outright. First, abolish the National Science Foundation (NSF), which is nothing more than a sluice-gate for funneling welfare to academics. Academics and universities love to haul in cash from the NSF, as these grants fund the research that keeps big-name academics at their schools. But big-name academics can just as easily gain research funds from private philanthropic foundations instead of looting American taxpayers. Annual savings from abolishing the NSF would be $5.6 billion from fy 2005 estimated levels and $5.7 billion by fy 2008. Actual savings compared to the current 2004 level of spending would be $5.3 billion.

The list of other "independent agencies" is lengthy, and while expenditures for each are relatively small, getting rid of all of these 57 independent agencies would save taxpayers $5.9 billion per year. Even if some of those 57 could not be abolished, axing the following – which would be the easiest targets – would save taxpayers nearly $4.9 billion per year: 1) the Appalachian Regional Commission ($107 million – pork); 2) the Broadcasting Board of Governors (whoa – $603 million for such things as broadcasting in the Middle East and to Cuba!); 3) the Consumer Product Safety Commission ($63 million – dictating to us what we can or cannot consume); 4) the Corporation for National and Community Service ($1,148 million – Americorps, the USA Freedom Corps, and other so-called volunteer programs that pay for volunteers!!); 5) the Corporation for Public Broadcasting ($390 million – let them sell commercial time like all the other networks); 6) the Equal Employment Opportunity Commission ($347 million – given the costs of discrimination in terms of lost profits should a business discriminate, this agency is an anachronism, to say the least); 7) the Farm Credit System Financial Assistance Corporation ($412 million – more aid to farmers); 8) Federal Drug Control Programs ($495 million for this continued flop!); 9) the Federal Election Commission ($55 million – to manage the stupid campaign contribution laws); 10) the Legal Services Corporation ($329 million – welfare for attorneys and alleged perpetrators); 11) the National Foundation on the Arts and Humanities ($283 million – funding all the art you would never spend one cent on); 12) the National Labor Relations Board ($249 million – as if employers and employees cannot agree on contract terms); 13) the Institute of Museum and Library Services ($249 million – oops, don't want to forget pork for our libraries and librarians); 14) the Neighborhood Reinvestment Corporation ($115 million in slush to pay off local politcally correct politicos); and, 15) the Presidio Trust ($45 million – a payoff for California's Sen. Barbara Boxer – keeping the land in government hands until the right real estate developer pays off enough politicians to get them to sell the property). Add $4.9 billion to the Cut-o-meter, as that represents a good approximation of the savings over current spending levels from abolishing these independent agencies or programs.

Several large independent agencies – such as the Securities and Exchange Commission (SEC), the Federal Communications Commission (FCC), the Export-Import Bank, and the Tennessee Valley Authority TVA) should be abolished, or, in the case of the TVA, privatized. I have not included them on the initial cut list as they might be too difficult to tackle, at least initially. The SEC and the FCC are revenue raisers in addition to being regulators. The SEC has failed on so many occasions that it ought to be easy to expose its record and abolish it altogether, recent corporate scandals notwithstanding. Eliminating it would save taxpayers $1.1 billion per year, and with its elimination, fees that offset most of these expenditures would no longer be collected, which would amount to a tax cut. Net savings would amount to about $300 million per year if it could be abolished.

The FCC, with the equivalent of its own taxing authority, shakes the public down for $6.95 billion per year, with $6.925 billion going for the subsidy of telecommunications and Internet services for libraries, schools, and health care establishments – all in the name of providing universal service. This big expansion of the FCC's budget occurred under the Telecommunications act of 1996, which even subsidizes such services in high-cost areas. Originally referred to as the "Gore tax," in honor of Al Gore's interest in telecommunications, the whole mess has given too much additional clout to an already over-powerful and increasingly useless FCC. The day for ending this monster will come, sooner if not later.

The Export-Import Bank appears not to cost the taxpayers anything on a cash basis, but that is not true. It only appears that way since past loans are being repaid while new monies are being funneled to politically favored exporters. Whacking this turkey would eventually save $600 million a year, although it may take time to abolish it. Why the U.S. needs to subsidize exports is never a question that is given an honest answer by Ex-Im's defenders.

Finally, the TVA needs to be privatized. It is a model of failure, with electric power production costs being much higher than in comparable privately-owned facilities. And its hydro-electric generation production costs are no longer a model for others to follow. It takes in revenues of over $8 billion per year and spends nearly $7.7 billion, with a net intake of about $370 million. Privatize it, raise money for debt reduction and get rid this legacy of Franklin Roosevelt's fascist state. This, too, may come sooner rather than later.

And the Cut-o-meter Total is …. $196 billion

Adding up all the projected additional cuts adds another $41 billion of savings to our previous total of $155 billion, bringing the Cut-o-meter total actual annual savings to a bit over $196 billion.

Stay tuned for more cuts!

Jim Grichar (aka Exx-Gman) [send him mail], formerly an economist with the federal government, writes to “un-spin” the federal government’s attempt to con the public. He teaches economics part-time at a community college and provides economic consulting services to the private sector.

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