Battling the B.I.G. Bulge

By Marshall Loeb

The spread of big, intrusive Government (B.I.G. for short) is a source of so much public discontent that, like epidemiology or the Korean War, it has become a subject of serious study in universities. The leading professor is Murray Weidenbaum, a former Assistant Secretary of the Treasury (1969-71) who knows his subject only too well. At the Center for the Study of American Business, which he heads at Washington University in St. Louis, Economist Weidenbaum, 51, is examining how the policies and regulations of B.I.G. are feeding inflation, impeding efficiency and otherwise rubbing up against private citizens. Given the bullish bulge of bureaucratic power, his institute is quite a growth enterprise.

"The Government is the nation's largest employer," says Weidenbaum, his accents echoing Brooklyn, where he grew up in the Depression-poor family of a cab driver. "Clearly the pay raises of Government employees and postal workers have been leading the inflationary parade for years. Somehow, Congress got sold on the notion of 'pay comparability' between the public and private sectors, ignoring the high federal fringes. And who makes the computations of the 'comparability'? Surprise, surprise! It's the civil servants themselves, which is like having the foxes guard the henhouse."

Government is also the largest single buyer of goods and services, says Weidenbaum, and it is about as cost conscious as a Saudi prince in Beverly Hills. Instead of buying from the lowest bidder or the best supplier, Government agencies and contractors are required to favor small businesses and suppliers in high-unemployment areas. That policy may or may not have social benefits, but it surely hypes inflation and discriminates against bigger companies.

On Government-aided construction projects, the Davis-Bacon Act requires that the job go not to the lowest bidder but to the contractor who agrees to pay the "prevailing" wages of the region, often meaning the highest union scales paid in the nearest big city. "So in rural Maine they'll use the wage scales of Boston, and in Appalachia they'll use the wage scales of Pittsburgh," says Weidenbaum. "But those wages are so far above the standards in Appalachia that frequently Appalachia firms don't bid for the jobs. They can't pay their workers on Government projects a whopping differential over their workers on commercial projects. Result: Pittsburgh firms get the Government jobs. They bring in Pittsburgh workers, and the taxpayer, in the goodness of his or her heart, doesn't bail out the poor people in Appalachia but subsidizes union workers from Pittsburgh."

One sign that the public is rebelling against these costly and cumbersome regulations is that they are being spoofed in that most popular graphic art form, the comic strips. Weidenbaum's walls are adorned with comics and editorial cartoons roasting everything from the ban against saccharin to the rising Matterhorn of forms to be filled out. In one strip, a weary Santa Claus complains about "all the environmental impact statements I gotta file for these flying reindeer."

But it is no joke when Weidenbaum brings forth sheaves of records of dozens of foundries--in Ohio, Pennsylvania, Alabama, Michigan, Illinois, Wisconsin, Kentucky--that had to close because they could not afford to meet requirements of the Environmental Protection Agency and the Occupational Safety and Health Administration. He collects reports of hundreds of small companies that have abandoned pension plans because they could not comply with the expensive requirements of the Employee Retirement Income Security Act (ERISA), "and so the worker winds up with no pension at all."

A sad irony, says Weidenbaum, is that Government freely violates its own regulations. "Federal installations are among the worst environmental offenders. OSHA offices fail to meet OSHA safety standards. And think of Social Security and the Civil Service Retirement Fund being subjected to the standards of ERISA. They would flunk."

Fight B.I.G., urges Weidenbaum. Demand cost-benefit studies for all of B.I.G.'s inflationary, efficiency-sapping, unfair policies. "We need economic impact statements," says Weidenbaum. "Before Uncle Sam lectures the private sector about holding down inflation, he badly needs to get his own house in order."

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