Just because the Resolution Trust Corporation (the savings and loan cleanup agency) has been permanently closed down, don't assume the S&L cleanup is over. Tens of billions of dollars in bond interest payments will come due through the year 2030.
Most analysts contend that it was government rules which created the S&L crisis in the first place -- leaving taxpayers to foot a large part of the bill.
Here's what occurred:
Taxpayers did bail out the S&Ls, thanks to legislation passed by Congress. By the end of 1995, the total public cost was $140 billion for the bailout. Some $90 billion of that went to place thrifts in receivership, with the other $50 billion going for other expenses.
While experts generally agree that the Resolution Trust Corporation did an excellent job cleaning up a sticky business, they are not as impressed with government forcing tax-payers to assume the liabilities for carefree bankers. About 90% of the interest payments on S&L bonds have come from the U.S. Treasury, despite the fact that the American taxpayer wasn't legally on the hook for the S&L bill.
Source: Carl Horowitz, "The continuing Thrift Bailout," Investor's Business Daily, February 1, 1996.
While the original mission of the Department of Energy (DOE) -- dealing with the fuel shortages of the 1970s -- has disappeared over the past 16 years, the agency's budget has nearly doubled.
DOE's largest program is cleaning up environmental problems at sites under its control, which costs about $6 billion per year. Of that, $4 billion goes for "management and infrastructure," which is to say that it goes for studying problems. That leaves about $2 billion to actually clean up the sites.
Source: William A. Wilson, "The Case Against the Department of Energy," Washington Times, February 6, 1996.
Young Americans are usually less inclined to turn up at the polls on election day than are their seniors. But that may change as they become increasingly aware of the burden of government debt that their parent's generation is bequeathing them.
The profligacy of government appears to be sinking in, and some young people are becoming truly concerned about the amount they will have to pay during their working lives just to service the federal debt, let alone pay off the principle.
Only by balancing the federal budget speedily will those now entering the workforce and their younger siblings escape some of this burden. And balancing the budget will have other salutary effects, such as lowering interest rates by one or two percentage points. This lowered interest rate would mean:
Source: Keith Halverstam, (Employment Policies Institute), "A Message From Those Stuck With the Bill," The Washington Times, February 8, 1996.
Some tax experts are advising Republicans in congress to simply adopt a freeze on total spending at the 1996 spending level and balance the budget in three years by letting increasing revenues catch up.
Their argument goes like this:
Advocates forecast that seniors and others would then support efforts to eliminate useless and wasteful federal agencies, departments and programs.
Far from having to make draconian cuts to meet a spending freeze, there would be nearly limitless opportunities to eliminate special interest subsidies, regional pork barrel projects and duplicative and wasteful bureaucracies. Opportunities would abound as well to block grant to states all welfare, nutrition, Medicaid and other indigent programs and thereby enjoy significant savings.
Source: Lewis K. Uhler (National Tax Limitation Committee), "Cutting the Budget, One Year at a Time, Washington Times, February 9, 1996.
For some inexplicable reason, the country's two top bond raters -- Moody's and Standard and Poor's -- recently threatened to downgrade certain U.S. government securities if Republicans in Congress insisted on passing a balanced budget first, before borrowing more money and going deeper into debt.
But the two bond raters would continue a pristine AAA rating if Congress did nothing toward reducing the deficit and simply boosted its ability to go even deeper into debt. They would prefer that the federal debt limit be raised from its current $4.9 trillion to $5.5 trillion.
Source: Senator Connie Mack (R-FL), "The Government Has Lousy Credit," Washington Times, February 15, 1996.
The Public Broadcasting System (PBS) is the largest television network in the United States. A year ago, leaders of PBS warned that if federal taxpayer subsidies were eliminated, as many as 87 public television stations might have to close.
Of course, if that happened, PBS would still have more affiliate stations than the ABC, CBS or NBC networks.
However, contrary to claims by PBS and National Public Radio (NPR) that voluntary donations wouldn't rise to make up for cuts in federal funding, viewers and listeners responded to their warnings last year by giving more.
Supporters of subsidies to public broadcasting also ignore the positive effect proposed tax cuts in the Republican budget plan would have on giving. During the 1980s, when tax rates were cut, individual donations to public TV increased every year.
However, in fiscal year 1991, after the Bush tax increase, the number of individual members dropped to 5.07 million.
Source: "Donations Rise as Funding Threatened," MediaNomics, Vol. 4, Issue 1, January 1996, Media Research Center, 113 S. West Street, 2nd Floor, Alexandria, VA 22314, (703) 683-9733.
Experts are calling a $59 million Department of Energy report on disposal of nuclear waste worthless.
Defenders say it has produced useful data for additional studies, but the extra studies -- which were supposed to have been part of the initial project -- will now cost more millions to perform.
Why did the study fail? In part because it was awarded to an inexperienced manager. Mainly though, it failed simply because the task is overwhelming.
Source: Editorial, "Botched Nuclear Report a Study in Waste," USA Today, February 16, 1996.
Government-guaranteed loans -- for which taxpayers are liable in the event of borrower default -- are expanding so fast that by 1998 they are expected to exceed $1 trillion, according to the Office of Management and Budget.
Each time a student or a small business takes out a federal loan, or a home buyer obtains a federally guaranteed mortgage, or a farmer gets federal insurance against crop damage the government's liabilities grow.
The U.S. Comptroller General has warned that the government has insufficient financial accounting systems and managers to ensure that those liabilities are properly monitored.
Source: Jeff Girth, "Federal Audits Find Rising Risks in Loan Programs," New York Times, February 23, 1996.
Despite reforms included in the Republican budget proposal, entitlements will continue to swell under the budget plans of either the president or Congress.
By the mid-2020s, entitlement spending alone would consume all federal revenues, and without borrowing nothing would be available for national defense.
Thus the federal government would still become a giant check-writing machine, transferring a rising share of middle-class worker income to middle-class retirees.
Source: "Tweedledum and Tweedledee," Facing Facts, Vol. 2, N. 1, January 19, 1996, Concord Coalition, 1019 19th Street, N.W., Suite 810, Washington, DC 20036, (202) 467-6222.
President Clinton's last proposal to balance the federal budget was phony.
Finally, the president's plan would decrease taxes by only $27 billion, while the budget proposal he vetoed would have reduced net taxes by almost $220 billion.
Source: Joel Bucher, "Clinton's Plan to Balance the Budget: The Buck Stops Where?" Capitol Comment No. 136, January 23, 1996, Citizens for A Sound Economy, 1250 H Street, NW, Suite 700, Washington, DC 20005, (202) 783-3870.