[Congressional Record Volume 140, Number 140 (Friday, September 30, 1994)]
[Extensions of Remarks]
[Page E]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: September 30, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
                    USA ANNUAL SHAREHOLDERS' REPORT

                                 ______


                           HON. STEPHEN HORN

                             of california

                    in the house of representatives

                       Friday, September 30, 1994

  Mr. HORN. Mr. Speaker, today the Citizens for Budget Reform, based in 
Rockville, MD, has released its annual ``Shareholders' Report'' to all 
citizens of our country. Some very useful questions have been raised by 
Dr. Harrison W. Fox, Jr., the president of Citizens for Budget Reform. 
As with any analysis of our $1.5 trillion budget, reasonable people--
myself included--might disagree with a recommendation here or there. 
But important questions are raised and should be carefully considered 
by the relevant authorization and appropriations committees as well as 
the Committee on Government Operations in the 104th Congress.
  Mr. Speaker, I submit an abridged version of the Annual Shareholders' 
Report prepared by Dr. Fox for the Record.

Citizens for Budget Reform's USA Annual Shareholders' Report: Abridged 
                                Version

       As most United States citizens already know, the Federal 
     Government is not well.
       The Symptoms include an ever increasing national debt, 
     runaway promises (liabilities), unfunded mandates and 
     widespread program failures. Our US debt is increasing at 
     hundreds of billions of dollars per year. Federal promises 
     are increasing ten (10) times faster than the debt--at more 
     than $3 trillion per year. Citizens are not getting full 
     value for the $1.5 trillion spent, each year, as hundreds of 
     programs have failed. And Federal mandates are costing State 
     and local governments, individuals, companies over 
     $600,000,000,000 ($600 billion) per year. Federal spending 
     and mandates consumed over $2,000,000,000,000 ($2 trillion) 
     in 1994--a third of GDP.
       The Prescription--Are there solutions? Yes! First, each 
     Federal government program must be reviewed. Those that are 
     not performing well should be abolished or modified. All 
     Federal promises (liabilities) should be reconsidered 
     annually. Many promises will not be met without massive tax 
     increases and/or sale of ``excess'' Federal assets.
       Federal mandates should be evaluated on a cost/benefit 
     basis. Only those improving our quality of life should be 
     maintained. Finally, the Federal budget and management 
     toolbox must be filled.
       This Report is divided into seven parts: the balance sheet, 
     the USA Federal budget, Federal mandates, the Federal $ 
     Chain, Road Map/Tool Box, Options, and auditor's opinion.


                             balance sheet

       Balance sheets give snapshots of a person or corporation's 
     financial status. They are expected to show the balance 
     between assets (things of value) and liabilities (promises 
     made).
       Federal assets include cash and monetary assets; gold; 
     accounts receivable; inventories; loans receivable; property, 
     plant, and equipment; International organization investments; 
     deferred retirement costs; financial assets; and the largest 
     asset by far--the power to tax.
       Federal government liabilities are the national debt and 
     yearly deficit; national debt interest; entitlements; 
     insurance; loan and credit guarantees; Government Sponsored 
     Enterprises; medical programs; needed infrastructure repairs; 
     facilities/resources future costs; Federal bill for 
     environmental cleanup; claims against the Federal government; 
     long-term contracts; and other contingencies.
       If the Federal government were a business, it would be 
     bankrupt? Whether it is or not, a change in Federal financial 
     management must begin soon. Corrective legislation must be 
     designed by Congress and signed by the President. Then rules 
     and regulations must be implemented by appointed and career 
     government managers. This will only occur after citizens 
     demand that it happen, removing those that stand in the way.
       Assets of the Federal government include hard assets and 
     other assets. The power to tax is the most vital Federal 
     government asset. The power to tax is only as good as 
     citizens' willingness to pay Federal taxes. The Power to 
     Create Dollars value is attributed to seigniorage and US 
     dollars circulating in foreign lands. The Power to Borrow has 
     resulted in a $4.6 trillion national debt.
       Federal governments hard assets plus (+) power to tax plus 
     (+) power to create money plus (+) power to borrow equal (=) 
     Total Assets $17,429,506,666,667 ($17.4 trillion).
       Federal government liabilities include fourteen categories 
     of promises that must be met by the taxpayers. Since 1991 
     Federal government recognized liabilities have increased by 
     over one hundred percent (100%). This translates into $20 
     trillion in additional Federal ``promises'' to pay. Total 
     Federal liabilities include $36,195,322,759,998 ($36.2 
     trillion) in promises.


                           usa federal budget

       Today's Federal budget is created by four (4) processes--
     the House and Senate budgets, authorizations, appropriations; 
     and the President's budget.
       If you are confused how the Federal budget process works, 
     you are not alone, members of Congress and high level 
     executive officials are sometimes confused, too.
       Put yourself in a newly elected Congressperson's shoes. You 
     are called on to make hundreds of Federal spending votes each 
     year. Would you be comfortable not knowing: how many programs 
     there are; how each program is performing; the legislative 
     details (most members never have access to or the time to 
     read bills or reports before being asked to vote); the 
     program's mission, goals, and objectives; what the benchmarks 
     for the future are; how the program will increase or 
     decrease promises (liabilities); and if the program 
     increases individual, corporate, and/or State and local 
     government regulatory costs or creates unfunded mandates.
       Of course you would not be very happy having to make 
     spending and income votes not knowing the basic facts and 
     money involved. The complex budget process combined with 
     little systematic information is a sure formula for Federal 
     spending disaster.
       The Federal government's has 31 ways to spend money--
     divided into six major categories.
       The President's and Congressional budgets are virtually 
     identical twins--differing by less than a few percent. The 
     differences are a billion here and billion there but pretty 
     soon it adds up to real dollars.
       Federal budget expenses (outlays) priorities have changed 
     over the last 14 years. The big gainers have been interest 
     payments, Social Security, and Medicare. The losers are 
     domestic programs, required (mandatory) spending other than 
     Social Security and Medicare, and defense.
       Changing budget priorities in the 1980s and 1990s have 
     highlighted increasing medical, Social Security, and interest 
     costs. Other major spending challenges, for the rest of the 
     1990s, include controlling Medicare and Medicaid while at the 
     same time stabilizing interest costs.
       The Federal spending process is like a four color marble 
     cake. The Congressional authorization, appropriations, and 
     budget processes swirl around the President's budget. The 
     complexity and lack of openness make for a barely 
     understandable Federal budget.
       Little sunshine penetrates the spending process in the 
     Congress and the Executive branch. Autocratic senior 
     appropriators in the Congress and the historically closed 
     Presidential budget building procedures both mitigate against 
     an open substantive debate.
       The President builds his budget within the closed confines 
     of the Office of Management and Budget (OMB). Departments and 
     agencies submit their spending requests to OMB and by January 
     1 the President's budget is all but complete. The President's 
     budget is released in early February for the fiscal year 
     beginning the next October. The Congress takes over with the 
     Budget Committees developing a Congressional Budget which 
     should be approved by April 15. Throughout the year 
     authorization committees approve legislation establishing 
     spending ceiling for specific programs. By early summer, the 
     13 Appropriations subcommittees begin developing spending 
     legislation. These spending bills should be approved and 
     signed by the President before October 1. For all 
     appropriations bills not approved by October 1, a 
     continuing resolution must be completed and signed by the 
     President.
       Federal programs are the heart of the United States' 
     budget. But no one knows how many programs there really are! 
     Citizens for Budget Reform estimates that there are 2,500 
     Federal programs including 200 housing programs, 81 means 
     tested welfare programs, over 145 education programs, at 
     least 135 jobs and training programs, dozens of health 
     programs, and many small business, rural, and economic 
     development programs.
       For many Federal programs a mission statement, goals, 
     objectives, and benchmarks are nonexistent or ill defined. 
     Few have in place performance and evaluation measures. Just 
     getting information about a program is often a gigantic 
     chore. Those questions go unanswered--how well are the 2,500 
     Federal program is often a gigantic chore. These questions go 
     unanswered--how well are the 2,500 Federal programs 
     performing?; where do overlaps occur?; how productive are 
     Federal managers?; and how effectively are taxpayers dollars 
     being spent? The technology--management information systems; 
     performance, evaluation and quality measures; and financial 
     and performance audits--is available to answer these 
     questions.
       The system is at fault. The Congress and the Presidency 
     have not sought to use the many new technologies. Well 
     meaning Federal managers, lacking a full tool box, have 
     little hope of running a successful program. What is urgently 
     needed?--the application of modern management, accounting, 
     finance, and economic technologies. The ``currency of 
     government''--federal managers and workers--must be given 
     more control of day-to-day operations. The Congressional and 
     executive branch focus needs to be on outcomes and results 
     not program micromanagement.
       Good tax law should be simple, efficient, neutral, and 
     equitable. Current tax law is rife with complexity, 
     inequities, inefficiencies, bias, and unjustified burdens.
       Even tax attorneys, who often spend a career studying the 
     tax code, admit that they know little about most of the tax 
     law.
       Over 81 percent of Federal revenues comes from individuals. 
     Individuals pay income taxes (44 percent) and social 
     insurance taxes/contributions (37 percent). Corporations pay 
     more than 10 percent. The remaining 9 percent is collected 
     through excise taxes, duties, and other receipts.
       As the Federal Tax system has grown more complex and 
     inequitable, tax avoidance (both conscious and unknowing) has 
     risen. One of the major reasons for a complete overhaul of 
     the tax system is to take the guesswork out of paying taxes. 
     A tax system that is fair, efficient, neutral, and easy to 
     comply with is a tax system that will collect more taxes. 
     Increasing collections, with spending restraint, should 
     reduce the effective rate that individuals and corporations 
     pay.
       The federal government is empowered to tax, thus generating 
     income. The power to tax was greatly enhanced by the passage, 
     in 1913, of the 16th amendment to the Constitution. This 
     amendment allowed progressive taxation of personal and 
     corporate income.
       Only the very rich were taxed originally. A rate of 1 
     percent was imposed on those earning over $3,000. This 
     captured just 2 percent of wage earners. During World War I, 
     income taxes became mass not class taxes. Tax rates have 
     ebbed and flowed over the years with significant tax 
     decreases occurring during the Coolidge, Kennedy, and Reagan 
     administrations.
       Today, the United States is at a tax system crossroads. 
     Will the path of least resistance be taken? Maintaining 
     failed programs, protected by special interests, is the easy 
     path. With increased spending demands, this easy path leads 
     to tax increases. The more difficult path includes both 
     program and tax system review. Our tax system reflect the 
     goals of society. Review of these goals will serve as a guide 
     to the ``higher'' road.
       Tax expenditures are really decisions to spend money. They 
     are akin to entitlement (mandatory) spending in that they are 
     generally permanent. This means they are rarely reviewed by 
     Congress and the President.
       Lobbyists love tax expenditures. Once ``on the books'', 
     they don't have to worry about yearly budget approval. In 
     fact, many think that tax expenditures are better than 
     Federal spending because ``you don't have to wait for a 
     government check.''


                            Federal Mandates

       Unfunded Federal mandates are Congress' way of legislating 
     for ``needs'' that they don't want to pay for. Federal 
     mandates include both regulatory and paperwork costs.
       Most mandates are legislated in an attempt to resolve a 
     problem. Few would question the need for clean water and pure 
     air. Unfortunately, the Federal government, in seeking to 
     meet needs, often places the financial burden on other 
     governments, citizens, and business.
       State and local governments are subject to nearly 200 
     Federal mandate laws. These include requirements that States 
     match Federal Medicaid funds, (over $60 billion), and that 
     cities' conform to the Clean Water Act ($3.6 billion).


                          the federal $ chain

       The Federal $ Chain is seventy-five years long. It begins 
     with the today's taxes paid by each citizen and ends with the 
     Social Security promise to the 18 year old just entering the 
     workforce who will live to be 93 years old.
       Federal $ Chain links are critical to each other. Weak 
     links limit the capability of the Federal government to meet 
     needs, pay for promises, and perform at peak efficiency.
       Today, the Federal government's elected representatives, 
     mangers, and the President focus almost exclusively on this 
     years' income (revenues) and expenses (outlays). Little 
     consideration is given to long term promises and how they 
     will be paid for.
       Promises have been made to fund entitlements (mandatory 
     spending) such as Social Security; government workers 
     pensions; and welfare benefits. These promises total nearly 
     $15,000,000,000,000 ($15 trillion). This is 41 percent of the 
     Federal government's long term liability.
       The national debt is the direct link between long term 
     promises (liabilities) and income and expenses. Since 1969, 
     Federal expenses have exceeded income. Thus each year for the 
     last quarter century the national debt has increased.


                                road map

       Where are we headed? Without a road map the Federal 
     government is destined to end up in the ditch. Our Federal 
     government needs a new map and the tools to fix problems and 
     fine tune successful programs.
       The USA Federal government's road map should be simple, 
     equitable, as well as efficient and effective.
       Citizens deserve equitable Federal action. Legislation and 
     regulations, today, are often unfair. Taxpayers, welfare 
     recipients, veterans using Federal health facilities, and 
     small businesspersons all feel the burn of unequal treatment. 
     This must change.
       The Federal government's road map must direct us to ``the 
     right kind of law and the right kind of administration of the 
     law.''
       ``Right laws'' must be founded on the values of the 
     American people. And to make sure that laws give the right 
     directions, goals, objectives, and benchmarks must be laid 
     out on a priority basis.
       The ``right kind of administration of the law'' will help 
     each Federal government program ``arrive'' with the right 
     results. Today, most Americans know that much of what the 
     Federal government does is inefficient and ineffective.
       The course must be corrected by utilizing the latest in 
     Asset/Liability management tools, budgeting and accounting 
     procedures, evaluation and measurement.


                              the tool box

       Federal government programs can be fixed with the right 
     tools. The top 10 tools are identified. A sample of these 
     include Government Asset/Liability Management; Capital 
     Budgeting, and Financial and Performance Audits. Furthermore, 
     the tool box that accompanies the road map must be filled 
     with the instruments that will promote Federal program 
     efficiency and effectiveness.


                                options

       The future solvency of the Federal government is dependent 
     on the actions that will correct today's problems. This 
     Report has identified four major problems too many promises, 
     program failure, budget and tax system inadequacy, and 
     unfunded mandates.
       Too many promises has lead to an over $36 trillion Federal 
     liability and myriad program failures. The Federal budget and 
     tax systems contribute to the growing federal debt. And 
     unfunded mandates reduce the tax base.
       Our Federal government needs a total overhaul. Little 
     changes will not solve the many problems that we are faced 
     with. Congress and the President must change the way they do 
     business. The taxpayers must become more informed and give 
     support to a higher level of debate and more efficient and 
     effective Federal government.
       Seventeen (17) Options are presented in three categories--
     Information and Management; Tools, Strategy and Programs; and 
     Institution and Process Reform. These Options include: 
     Federal government assets and liabilities should be in 
     balance by 2004, Federal managers should be given more 
     control over program decisions and allocation of resources, 
     Federal programs should be consolidated and reduced by at 
     least 50 percent, The Federal budget process needs to be 
     simplified, and Congress should reform itself.
       Your support, along with other citizens, for a more 
     efficient and effective government is greatly appreciated.
       Tables, graphics, definitions, footnotes, and the detailed 
     Federal Balance Sheet--with over 100 lines--are included in 
     the unabridged USA Annual Shareholders' Report.
       Citizens for Budget Reform is working to arm Citizens with 
     knowledge weapons to attack government program failure. The 
     Federal government's increasing promises and debt, as well as 
     program failures, led a group of taxpayers to establish 
     Citizens for Budget Reform (CBR) in December 1992. CBR's 
     major goal is to encourage informed debate about government 
     performance and appropriate Citizen action. CBR is developing 
     and distributing tools that enhance the ability of Citizens 
     and their representatives to make changes in the way Federal, 
     state, and local governments budget, measure performance and 
     productivity, execute program review and evaluation, make 
     expenditure decisions, develop tax policy; and account for 
     and manage programs.
       CBR plans to grow steadily by: Producing the USA 
     Shareholders' Annual Report (First release, Fall 1994); 
     presenting a Productivity Report for Federal government 
     (First release, Spring 1995); constructing a Federal Budget 
     Information System (First release, Fall 1995); and providing 
     Citizens and their representatives access to econometric and 
     tax models, program review and evaluation tools, debt and 
     deficit statistics, policy analysis, regulatory mandates, and 
     paperwork burdens (Phased, 1995 to 1998).

                          ____________________