An American Life

by Ronald Reagan

  In the past fifty-nine years, there have been only eight scattered years in which the budget was balanced. For fifty-one of those years there was a deficit, and, as I pointed out, for fifty-five of those years the Democrats controlled the House of Representatives.

  Every year that I was president, I asked Congress for a constitutional amendment that would require the federal government—like any well-run household or business—to balance its budget. But Congress (and I concede there was opposition to it on both sides of the political aisle) wouldn’t sit still for this infringement on its spendthrift ways. There was some important progress: The spending limits imposed on Congress by the Gramm-Rudman-Hollings law have helped curb its extravagance. But never underestimate the willingness of congressmen to circumvent their own rules, or the public will, in the pursuit of their enthusiasm to spend other people’s money.

  I don’t put all the blame on Congress. Part of the problem rests with political realities. It’s a fact of life that running for political office in this country is very expensive; once in office, few incumbents want to surrender their seats in Congress, so they often turn to the special interests, who want special consideration from them, for the money to finance their campaigns. Then, after the election, they repay the favors—with the taxpayers’ money.

  That’s one of the reasons I think presidents need a line-item veto authority. I had it when I was governor of California, and governors in forty-two other states have it as well. When the state legislature sent me a budget, I could take a blue pencil and reduce spending on individual items to a level taxpayers could afford. If there was something laudable about a piece of legislation, I could sign it but veto features in it that were pure pork. The legislators had the opportunity to override my decision—but none of my 943 vetoes in Sacramento were overturned, because legislators didn’t want to publicly defend, under the full scrutiny of voters, their pork-barrel projects or items they had husbanded through their committees because of the influence of campaign donors and special-interest groups.

  Until presidents have a line-item veto and there is a constitutional amendment mandating a balanced budget, I think the country is likely to face never-ending deficits piled up by a profligate Congress unable or unwilling to make the hard-nosed decisions necessary to bring down spending to a level the country can afford.

  Although I was disappointed that I wasn’t able to do more, we still made progress in slowing the growth of government. Despite resistance from Congress and the bureaucracy, and despite continuing population growth, the size of the federal civilian work force declined about five percent during the eight years we were in Washington. Manpower levels in some bureaucracies were cut in half, and while we were cutting the overall federal work force, minority employment went up—it rose twenty-seven percent—and the number of women in professional positions in the federal force went up thirty-four percent.

  A lot of the reductions resulted from simply giving government workers the opportunity and tools to operate as efficiently as their counterparts in the private business world. In 1982, I asked J. Peter Grace, chief executive of W. R. Grace & Company and a Democrat, to establish a panel of top businessmen to study federal operations and recommend how we could reduce waste and make the government more efficient. The Grace Commission—also known as the Private Sector Survey on Cost Control—was patterned after that panel of businessmen I’d appointed when I was governor to streamline the government of California. The idea had worked in Sacramento; why not in Washington?

  There was lots of ground for his group to cover. As Grace has pointed out, the federal government is the world’s largest power producer, insurer, lender, borrower, operator of hospitals, landowner, tenant, holder of grazing land, timber seller, grain owner, warehouse operator, shipowner, and truck-fleet operator. He recruited more than two thousand volunteer businessmen from around the country to review all aspects of federal operations, and produced a report with 2,478 recommendations on how to make those operations more efficient. I think it should be required reading for anyone interested in how the federal government operates.

  These volunteers discovered things going on in government that businesses hadn’t been doing for a generation. The examples of waste and mismanagement they found are so numerous they could fill a book by themselves, but here are a few examples:

  • It cost the Veterans Administration between $100 and $140 to process (not pay) a medical claim—versus $3 to $6 for doing the same thing at private insurance companies.

  • The army spent an average of $4.20 on administrative costs to issue a paycheck, versus an average of $1 in private business.

  • Although the federal government accounts for about one-quarter of all economic activity in the country, it had no centralized system of management for its financial and accounting operations, resulting in waste, inefficiency, and constant problems of the left hand not knowing what the right hand was doing. There were 132 different payroll systems and 380 different and incompatible accounting systems used by government agencies. The utilization of antiquated cash-flow management techniques instead of modern electronic funds-transfer systems alone cost taxpayers some $2.3 billion a year. Some agencies were still using cardboard checks, which business hadn’t used for years.

  • Of the seventeen thousand computers used by the federal government, half were so obsolete that their manufacturers refused to service them. The bureaucracy’s process for purchasing new computers took an average of more than two years, an interval guaranteed to perpetuate this obsolescence.

  • Despite eighty thousand pages of government procurement regulations and twenty thousand additional pages generated every year, federal employees had virtually no incentive to seek the lowest cost for items they purchased for the government, or to find less expensive ways of carrying out any of their duties for government. The incentive to work efficiently and at the least cost, which is found in any well-managed business, simply did not exist in the government.

  • While salaries paid many categories of federal civil service workers were at least as high as those of Americans in comparable jobs in private industry, the value of their fringe benefits, on average, was seventy-six percent more than in the private sector.

  • Pensions paid federal civilian employees were almost twice as high as those for Americans with comparable jobs in private business.

  • Fraud and waste were common in government entitlement programs, amounting in the federal food stamp program alone to at least $1 billion a year—a sum equivalent to the income taxes paid by 450,857 median-income families. The Social Security Administration was found to have made $14.6 billion in erroneous payments in the years 1980-1982.

  Of the Grace Commission’s 2,478 recommendations, we were able to implement almost 800, which saved taxpayers tens of billions of dollars and kept the deficit from growing even larger than it did. Based on these recommendations and those of other advisory panels, for example, we eliminated seventy-five federal printing offices that we didn’t need (and eliminated about half the government’s publications, including such best sellers as How to Buy Eggs). Just by installing improved accounting and cash-flow management systems in a few agencies to handle the federal government’s $2-trillion-a-year cash flow, we earned taxpayers billions of dollars a year in additional interest revenues on the government’s money. The number of different computer payroll systems used in government was reduced to fewer than 50 from 132; the number of accounting systems was reduced from 380 to fewer than 250. While the size of the federal bureaucracy was reduced, the application of modern, streamlining administrative procedures brought down the time it took to obtain a Social Security card from forty-nine days to ten; the time to get a passport from forty-three days to ten; and the time to get an export license from seventy-five days to seventeen. The proportion of federal contracts awarded competitively was increased from less than forty percent to fifty-eight percent. The volume of new regulations, listed each day in the Federal Register,
was reduced by forty-three percent, or an average of 149 pages a day. Overall, the average number of regulations issued by the government during our administration marked a decline of forty-one percent compared with the number issued during the previous administration.

  We tried to implement all the Grace Commission’s recommendations and those of other advisory groups I appointed with a challenge to give Americans a better payoff for their tax dollars—but many of the proposals needed legislative approval, and various groups that hold sway over Congress kept us from getting all we wanted. Despite this resistance and my disappointment over not doing more, we made progress I’m proud of: In 1980, federal expenditures were growing at an annual rate of more than fourteen percent; by 1987, the rate of growth was down to one percent, and if you factor in inflation, there was a net decrease in spending that year, the first since 1973.

  I hope history will look back on the eighties not only as a period of economic recovery and a time when we put the brakes on the growth of government, but as a time of fundamental change for our economy and a resurgence of the American spirit of generosity that touched off an unprecedented outpouring of good deeds. While growing up in Dixon, I came to the conclusion when I was still fairly young that when it came to solving a community’s problems, no one was better at it than ordinary people. Whether it was my mother bringing a meal to a family that was down on its luck, my dad canvassing the county in search of work for the jobless, or a group of neighbors getting together to help rebuild a farmer’s barn lost in a fire, I witnessed how people helping one another could be a far more effective means of solving a community’s problems than government giveaway programs. With that in mind, I created the White House Office of Private Sector Initiatives. Under the direction of Fred Ryan, a Los Angeles attorney, its task was to revitalize the great American spirit of neighbor helping neighbor. Through its efforts, countless Americans joined volunteer programs, and private charitable giving in America more than doubled between 1980 and 1988. The total giving in 1988 was $103.87 billion, compared with $48.73 billion in 1980—a 101.2-percent increase.

  The economic crisis of the early 1980s brought hard times for many Americans. I don’t undervalue for a moment the suffering they experienced as we fought together to pull the nation out of its worst economic crisis in half a century. For those who lost their farms or businesses or saw their jobs vanish during the recession, life was as bleak as it was for Americans caught up in the economic upheavals of the Great Depression. A lot of those people took the time to write to me, some expressing anger, others compassion and support for me. There was something I found very interesting about many of these letters: Despite the great hardships and suffering they were experiencing, many of the Americans who wrote to me expressed an optimism and faith in the future, a belief that, yes, we were living through a difficult storm, but it would pass. One twenty-seven-year-old mother of three from a small town in Oregon wrote that her husband, a construction worker, had been out of a job for over a year, their family’s car had been repossessed, and they had been forced to move in with her grandparents when they couldn’t pay their rent any longer. “When we thought all was lost,” she wrote, “my grandparents taught us survival skills that they had learned during the Depression. We’ve learned the art of sewing and quilt making, we’ve had the pleasures of long winter nights rediscovering our family roots and growing closer; most of all, we’re learning the old values, humility and independence that helped to make this country strong.” Despite the hardships her family had experienced, she said she wished me well on our economic programs and the administration’s efforts to cut government spending, even though it might mean more hardship. “I think it’s time,” she said, that “we as a country came off our high horses and got back to the business of living with pride and independence. Of living within our means. It’s time we started asking, ‘What does it cost?’ instead of ‘how much are the payments?’”

  As difficult as it was, I think the period of economic hardship that began during the Carter years and continued until the economic recovery program took hold taught us something about ourselves and our country and, in the end, America emerged stronger than ever. Take American agriculture: For decades, it had been one of the wonders of the world. For most of the postwar period, a relative handful of men and women produced enough food not only for themselves but for the growing population of America and much of the rest of the world. Along the way, though, they became too dependent on handouts and artificial price supports.

  Franklin D. Roosevelt first proposed the notion of paying farmers not to plant their land as an emergency measure during the pit of the Depression. But, he said in 1933, the subsidies had to be temporary: It was wrong for the government to pay farmers not to produce and keep land fallow, FDR said.

  Nevertheless, over the decades, largely because of the influence on Congress of farm states and agribusiness, the subsidies became as deeply planted in the Washington firmament as other entitlement giveaway programs. Our government paid farmers billions to grow commodities that were already in excess supply, sometimes with irrigation water subsidized at high cost by the taxpayers; then it paid them not to grow the commodities and spent millions to store the surplus that subsidies had generated. Instead of crops, farmers discovered they could harvest money from the federal pocketbook—that is, money from the pocketbooks of the rest of us. In a way, you can’t blame them. It was there to be taken.

  Our farmers have always had to deal with the capriciousness of nature—floods, droughts, tornadoes. But in the late 1970s and early 1980s, they also rode a roller coaster of man-made problems: rapid inflation, high interest rates, depressed prices related to the Soviet grain embargo, then rapid disinflation. For many, it was a roller coaster ride to disaster.

  Land prices and prices for many commodities rose out of sight during the years of rapid inflation that finally began to ebb in 1981. During this heady period, farmers borrowed billions using the inflated value of their property as collateral. Many overextended themselves, assuming they would be able to repay these big loans with inflated dollars. As inflation came down, however, so did the value of their land and, in some cases, the prices they received for their products. They still had to pay off their loans at double-digit interest rates, and after a while some banks began calling in their notes, pointing out that the land wasn’t as valuable as the farmers had once said it was.

  Meanwhile, American farmers had new competition. Once, they had had the only game in town and were relied upon to feed a large part of the world. But during the 1960s and 1970s, other countries began developing—often with help from some of our best farmers and agronomists—an agricultural base that was capable not only of feeding their own people but of producing enough grain and other food for export. Many countries, including some of our allies, were not content to let the free market determine prices in the export market; they subsidized farmers to overproduce, glutting the market and bringing down the prices received by our farmers.

  Coupled with the growing competition from abroad and droughts and other natural disasters at home, the crippling debt that farmers had taken on caused tens of thousands of them to lose their farms during the early and mid-eighties. Through it all, the farmers who suffered most were those who had been encouraged to overproduce by the billions of dollars available in federal subsidies.

  About half of American farmers—fruit and vegetable growers, for example—operate essentially outside the subsidy system. Although they are subject, like all farmers, to the whims of nature, their fortunes are largely determined by their individual decisions: Based on market conditions, they must choose how much land they will plant, how many crops they will produce. Many, if not most, of these farmers prospered during the years of economic pestilence that ravaged the rest of American agriculture.

  In the farm crisis of the mid-eighties, we gave farmers more billions than any administration in history. Frankly, I didn’t relish giving so much of the taxpayers’ money
away, especially when we were battling to bring down the deficit. But farmers were facing a real emergency, and since government had produced many of their problems, I believed it had an obligation to help bail out the victims, then to work to return farming to the free market.

  We made some progress in dealing with the problems in agriculture: In a bill I signed in 1985, Congress took large amounts of land that had been under the subsidy programs out of production, lowered the per-bushel subsidies farmers received, and offered other incentives that reduced farmers’ reliance on subsidies. Together with improvements in the overall economy—reduced unemployment, lower inflation, and lower interest rates—the law helped American agriculture begin a historic turnaround: Within a year of its passage, farm revenues, profits, and exports were on the rise, while the amount of federal subsidies was in decline.

  Between 1986 and 1989, subsidies fell from more than $25 billion annually to less than $10 billion. I wish I could have ended farm subsidies altogether—I still feel the answer is unfettered free competition—but, as I learned in Washington, you seldom get everything you want, and I’ll settle for the progress we made.

  There were other hardships in America during the long recession: In the emerald forests of the Pacific Northwest, loggers and sawmill workers saw thousands of jobs swallowed up by a prolonged slump in housing construction caused by bloated interest rates. In scores of tree-shaded towns in the South, textile mills, often a community’s only major employer, shut their doors and furloughed thousands because of slack sales and new competition from abroad. From the industrial states of the Northeast to the dusty mining towns of the West, more jobs disappeared.