CONSUMER RELATED BUDGET CUTS HEARINGS BEFORE THE SUBCOMMITTEE ON CONSUMER ECONOMICS OF THE JOINT ECONOMIC COMMITTEE CONGRESS OF THE UNITED STATES NINETY-THIRD CON GRESS FIRST SESSION APRIL 17 AND 18, 1973 Printed for the use of the Joint Economic Committee U.S. GOVERNMENT PRINTING OFFICE 98-088 WASHINGTON : 1973 For sale by the Superintendent of Documents, U.S. Government Printing Office Washington, D.C. 20402 -Price $1.45 Stock Number 5270-01950 JOINT ECONOMIC COMMITTEE (Created pursuant to see. 5(a) of Public Law 304, 79th Cong.) WRIGHT PATMAN, Texas, Chairman WILLIAM PROXMIRE, Wisconsin, Vice Chairman HOUSE OF REPRESENTATIVES SENATE RICHARD BOLLING, Missouri JOHN SPARKMAN, Alabama HENRY S. REUSS, Wisconsin J. W. FULBRIGHT, Arkansas MARTHA W. GRIFFITHS, Michigan ABRAHAM RIBICOFF, Connecticut WILLIAM S. MOORHEAD, Pennsylvania HUBERT H. HUMPHREY, Minnesota HUGH L. CAREY, New York LLOYD M. BENTSEN, Ja., Texas WILLIAM B. WIDNALL, New Jersey JACOB K. JAVITS, New York BARBER B. CONABLE, JR., New York CHARLES H. PERCY, Illinois CLARENCE J. BROWN, Ohio JAMES B. PEARSON, Kansas BEN B. BLACK-BURN, Georgia RICHARD S. SCHWEIKER, Pennsylvania JOHN R. STARE, Executive Director LOUGHLIN F. McHUGH, Senior Economist ECONOMISTS WILLIAM A. Cox Lucy A. FALCONE JERRY J. JASINOWSaI JOHN R. KARLIEK RICHARD F. KAUFMAN L. DOUGLAS LEE COURTENAY M. SLATER MINORITY LESLIE J. BANDER GEORGE D. KRUMRHAAR, Jr. (Counsel) WALTER B. LAESSIG (Counsel) SUBCOMMITTEE ON CONSUMER ECONOMICS HUBERT H. HUMPHREY, Minnesota, Chairman SENATE HOUSE OF REPRESENTATIVES WILLIAM PROXMIRE, Wisconsin WILLIAM S. MOORHEAD, Pennsylvania ABRAHAM RIBICOFF, Connecticut MARTHA W. GRIFFITHS, Michigan JACOB K. JAVITS, New York HENRY S. REUSS, Wisconsin CHARLES H. PERCY, Illinois HUGH L. CAREY, New York WILLIAM B. WIDNALL, New Jersey CLARENCE J. BROWN, Ohio (III CONTENTS WITNESSES AND STATEMENTS TUESDAY, APRIL 17, 1973 Humphrey, Hon. Hubert H., chairman of the Subcommittee on Consumer Page Economics: Opening statement- 1 Maier, Hon. Henry, mayor of Milwaukee, Wis., accompanied by Gene La Rocque, director, Center for Defense Information; and Patrick Mc- Laughlin ------------------------------ 18 WEDNESDAY, APRIL 18, 1973 Humphrey, Hon. Hubert H., chairman of the Subcommittee on Consumer Economics: Opening statement -37 Staats, Hon. Elmer B., Comptroller General of the United States, accom- panied by Gregory J. Ahart, Director of the Manpower and Welfare Division; and Franklin Curtis, Associate Director -81 Cohen, Wilbur J., dean School of Education, University of Michigan, and former Secretary of H'ealth, Education, and Welfare -102 Thurow, Lester, professor of economics, Massachusetts Institute of Technology -190 SUBMISSIONS FOR THE RECORD TUESDAY, APRIL 17, 1973 Conable, Hon. Barber B., Jr.: Exchange of correspondence between Chairman Humphrey and Hon. Roy L. Ash, Director, Office of Management and Budget, regarding Mr. Ash's appearance before the subcommittee -16 Humphrey, Hon. Hubert H.: "An Analysis of the Administration's Spending Reform Proposals," a Joint Economic Committee staff study prepared with the assistance of the Library of Congress, dated April 16, 1973- 6 Senate Concurrent Resolution 14-Submission of a concurrent resolution relating to national priorities, from the Congressional Record, March 6, 1973 -- "Mondale Says the Minimum Tax Still Lets Some Pay Nothing, Others an Average of 4 Percent," article from the New York Times, April 16, 1973 -34 Maier, Hon. Henry, et al.: List of board of directors, Coalition for Human Needs and Budget Priorities ------------------------------------ 31 WEDNESDAY, APRIL 18, 1973 Cohen, Wilbur J.: Proposal to eliminate dental care to adults in medicaid -104 Prepared statement -110 Material supporting continuation of the program of Federal assistance to professional education in public health -181 (III) IV Humphrey, Hon. Hubert H.: "The Whos and Whys of Budget Cuts," editorial from the Washington Page Post, April 18, 1973 -95 Material relating to impact of 1974 budget cutbacks upon educational programs and budgets ----- --- 115 Staats, Hon. Elmer B., et al.: Exchange of correspondence between Chairman Humphrey and Mr. Staats regarding certain information on the use of speechmaking guidelines, commonly referred to as the "Battle of the Budget" kit, being used by Federal officials, with attached copy of the kit -39 General Accounting Office classifications of program reductions and terminations listed on pages 50 through 57 of the Budget of the U.S. Government, fiscal year 1974, based on information submitted to the Subcommittee on Consumer Economics, Joint Economic Committee, by the Office of Management and Budget on March 19, 1973 -86 CONSUMER RELATED BUDGET CUTS TUESDAY, APRIL 17, 1973 CONGRESS OF THE UNITED STATES, SUBCOMMIrITEE ON CONSUMER ECONOMICS OF THE JOINT EcoNoMIc CO-MmiTrE-, Wa8hington, D.C. The subcommittee met, pursuant to notice, at 10:10 a.m., in room 318, Russell Senate Office Building, Hon. Hubert H. Humphrey (chairman of the subcommittee) presiding. Present: Senator Humphrey and Representative Conable. Also present: Jerry J. Jasinowski and L. Douglas Lee, professional staff members; Michael J. Runde, administrative assistant; Leslie J. Bander, minority economist; and Walter B. Laessig, minority counsel. OPENING STATEMENT OF CHAIRMAN HUMPHREY Chairman HuMPHrEY. The meeting of the Subcommittee on Con- sumer Economics is called to order. The first thing I want to do is to thank the mayor of Milwaukee for his presence here today. Mayor Maier, I thank you very much for your coming. And we look forward to your testimony. The brother of one of our other witnesses, Professor Darfman, passed away, and he was unable to be with us. And the third witness is the Director of the Office of Management and. Budget. And he has declined our invitation. So this morning, I must regretfully open this hearing with the bad news that Mr. Roy L. Ash, Director of the Office of Management and Budget, has refused to testify before the Consumer Economics Subcommittee. Over the weekend I received a letter from Mr. Ash in which he said that, "It would be inappropriate for me to appear before your sub- committee on April 17." Mr. Ash's reason for refusing to come is that he is only responsible for the overall fiscal outlook, but not for the details about why cer- tain budget cuts are made. We had hoped to analyze these budget cuts in relationship to the economy, as to what these budget cuts would mean to a city, for ex- ample, such as the city of Milwaukee, or other cities in the United States, and what these budget cuts would mean in the fields of educa- tion, health, and many areas of our social and economic structure that are so meaningful to our people. (1) 2 Regretfully, Mr. Ash is not with us. That puts him in the incomprehensible position of being in charge of managing the budget in general but not in particular. Mr. Ash's position is incorrect in two ways. First, his decision to emphasize budget totals is in large measure irrelevant since there is little controversy about the totals. The President has proposed spending $268.7 billion in fiscal 1974. The vast majority of professional economists agree with roughly this level as does the Congress. The Senate in fact has formally established a $268 billion ceiling for fiscal 1974, $700 million less than the Presi- dent's proposal. I voted for that ceiling. I have been before two committees of the Congress, one on congres- sional operations and one committee on the budget, recommending that we have a budget ceiling, and that the budget ceiling of $268 billion was more than adequate. Second, Mr. Ash's refusal to testify is in my judgment an abdication of his responsibilities to the public and to Congress as the Director of the Office of Management and Budget. It is well established that the OMB Director is responsible for the detailed evaluation of particular Government programs, and for actions that reduce or terminate these programs. Mr. Ash in fact has said the same on several occasions. When testify- ing before the Joint Economic Committee earlier this vear, Mr. Ash had the following colloquy with Congressman Widnall: Representative WIDNALL. Mr. Ash, you have stated repeatedly in your testi- mony that in preparing this budget an effort was made to examine Government programs and to weed out the ones which were ineffective or outmoded. First, could you tell us how you went about this, since I believe this was a direct function of OMB? And second. can you tell me what other programs we might.see come under careful scrutiny for inclusion on coming budget years? Mr. AsH. I will answer the last part first. I can give a shorter answer. All programs will come under careful scrutiny for the coming years. That is one of the responsibilities imposed by the President upon the Office of Management and Budget and we would expect to continue to keep all programs under careful scrutiny. As to the first part of the question, how were these judgments made? They were made. first, by observing the applicable laws and, second, looking at each of the programs in relation to them. * * * In other words, Mr. Ash admits his responsibility when it suits him, but it does not suit him when confronted with searching questions about the honesty and competence of the administration's spending policies. The Joint Economic Committee staff study I released last Friday, analyzing OMTBs budget cut justifications, raised some questions Mr. Ash apparently cannot effectively answer. First, where are the studies to support the administration's budget cuts ? While the administration claims to have made the "most exhaustive evaluation of Federal programs ever undertaken"-and that is a quotation from Mr. Ash himself-the truth is that there are no studies or evaluations to back up the budget cuts. I asked Mr. Ash to send the Joint Economic Committee the cost- benefit studies showing that the programs being cut are the most ineffective.