[Congressional Record Volume 155, Number 118 (Friday, July 31, 2009)]
[House]
[Page H9250]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


              CAN GOVERNMENT PROGRAMS STAY WITHIN BUDGET?

  The SPEAKER pro tempore. Under a previous order of the House, the 
gentlewoman from North Carolina (Ms. Foxx) is recognized for 5 minutes.
  Ms. FOXX. Mr. Speaker, today, the House rushed through a bill that 
provides an additional $2 billion for the so-called Cash for Clunkers 
program. Apparently, the lure of free money from Uncle Sam provoked 
such a tsunami of clunkers that the program is already broke.
  Mr. Speaker, everyone loves ``free money.'' The bailed-out banks 
loved their $700 billion last fall. The bailed-out automakers loved 
their $86 billion. So it's not a surprise that the initial funding for 
Cash for Clunkers dried up in a matter of days.
  So the question is: If the government so underestimated the cost of 
this program, and if the backlog of requests from dealers is already so 
huge, what does this tell us about these types of government programs--
that maybe they don't always function as they were predicted to, and 
that sometimes they cost taxpayers much more than was estimated?
  One large dealership group in Utah had this to say about the hoops 
they had to jump through to avoid the fines for noncompliance: The auto 
dealer said, ``Dealers are being asked to be compliant with several 
rules that are often confusing and unrealistic . . . it is apparent 
that those writing the rules don't understand how a car deal actually 
happens.''
  This dealer went on to say that the government agency in charge of 
the Cash for Clunkers program has ``threatened large fines for 
noncompliance. We are a top-10 dealer group in the country, and have 
gone to great lengths to be compliant, but it is even confusing to us. 
It will be a nightmare for the many smaller dealerships around the 
country.''
  So far, we've learned several things from this Cash for Clunkers 
program. Lesson 1: Businesses and consumers really love free money--
except when they're the ones paying for someone else's free money. 
Lesson 2: The government is abysmal at predicting how much programs 
will cost. Lesson 3: Complying with Federal mandates is a nightmare.
  Of course, we should not overlook the fact that there may very well 
be some unintended consequences of this program. For instance, The New 
York Times reported in April that France had a similar program from 
1994 to 1996. Guess what? It worked. Well, kind of. There were lots of 
auto sales initially, but the program was followed by a severe drop in 
auto sales in 1997 and in 1998. Isn't that interesting? It turns out 
the program was simply shifting demand forward. What is keeping the 
U.S. Cash for Clunkers program from doing the same thing? Nothing.
  Let's return to Lesson 2: Congress' inability to accurately estimate 
the cost or the effect of new government programs.
  Based on research from Congress' Joint Economic Committee over the 
years, congressional estimates of the cost of health care programs have 
been extremely unreliable. For example, when Congress was considering 
Medicare part A, the hospital insurance component, Congress estimated 
it would cost $9 billion by 1990. The actual cost in 1990 was $67 
billion, 7 times more than Congress estimated. The 1967 estimate for 
the entire Medicare program in 1990 was $12 billion. The actual cost? 
$111 billion. It was almost 10 times the original estimate.
  Later, in 1987, Congress estimated that Medicaid's disproportionate 
share of hospital payments to States would cost less than $1 billion in 
1992. Five years later, the results were in. It was $17 billion, which 
is an incomprehensible 17-fold increase over the estimate from just 5 
years earlier. You get the idea.
  Today's Cash for Clunkers example is just the latest in a long line 
of programs that turned out to be dramatically more expensive than 
anyone predicted, not to mention notoriously difficult to comply with 
or to figure out. Perhaps the most amazing part of this example is that 
it reminds me of the ongoing discussion over health care reform.
  Here we've got a health system that is in need of reform, and some 
people are pushing a bill that amounts to a government takeover of 
health care. They like to call it a ``public option.'' The 
Congressional Budget Office already has said it would add $239 billion 
to the deficit over 10 years, but as we've just seen, government 
programs have a tendency to take on a life of their own and cost 
taxpayers way more than was originally estimated or envisioned.
  While I'm willing to allow for some margin of error in estimated 
costs--they are estimates after all--what concerns me is that, today, 
we're starting out with estimates for huge deficits with this health 
care plan. At the same time, we're paying for it out of the pockets of 
America's job creators--small businesses.
  If the current proposal becomes law, are we going to be coming back 
to these small businesses with another tax increase in 5 or 10 years? 
With our track record on programs like Cash for Clunkers, that wouldn't 
surprise me one bit.

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