From the Schools to the Sewers

The budget surgery would affect just about everybody

Even more impressive than the depth of Reagan's proposed budget cuts is the breadth. The President is asking Congress to reduce future spending for no fewer than 83 programs that benefit workers, businessmen, farmers, students, artists, the elderly, the sick, the poor, passengers on airplanes, trains, subways, buses--just about everybody. He would lower federal support for museums, delay some space-exploration projects, reduce postal subsidies possibly enough to force cancellation of Saturday mail deliveries. He would give states and cities far more authority to decide how to use money sent from Washington for education and health purposes. Yacht owners would have to pay more to use waterways; air travelers higher ticket prices to make up for reduced airport subsidies. Here is a sample of what the President proposes to cut, who will be affected and how:

College Student Loans. Aid to college students--notably the Guaranteed Student Loan Program--will be cut by $803 million next year, or by about 16%. The cuts will be almost twice that in the following year. The loans, subsidized at 9%, are now available regardless of need; under Reagan's plan, families must prove they genuinely need loans to meet college costs. In addition, interest payments may no longer be deferred. Funding for Pell grants, which are direct scholarships to needy students, will also be reduced.Says John Phillips, president of the National Association of Independent Colleges and Universities: "The effect will be an overwhelming shift to cheaper, public-supported colleges." State college administrators agree; they fear that this influx will place a new strain on state and local taxpayers. In Reagan's budget message, the Administration countered that benefits "have become excessive," and "could be recklessly expanded over the next few years without reforms."

Comprehensive Employment and Training Act. Reagan plans to abolish the act's public service employment programs, which would cost more than $3.7 billion next year. They pay the salaries of 1,600 employees in city government and nonprofit agencies in San Francisco alone. Arkansas may lose as many as 2,500 workers, while New York City will dismiss 11,500. "Most of ours will end up going back on welfare," complains Ronald Gault, New York's employment commissioner. Yet of all Reagan's budget cuts, the controversial CETA program may be among the least missed. Says Cleveland Mayor George Voinovich, whose city has 500 CETA workers: "CETA was supposed to help us train people to do jobs in the private sector. But for years jobs in the private sector have been shrinking. It would have been more helpful to have used that CETA money to modernize our older industries and create jobs."

Dairy Price Supports. By stopping a price-support increase due this spring and cutting next year's subsidy 64%, the Reagan Administration would win smiles around a lot of breakfast tables: beginning April 1, the price of a gallon of milk (which currently is about $2.30) would drop nearly 150. Yet the dairy industry argues that such a drastic slash in price supports would devastate farmers, many of whom increased their herds over the past few years in anticipation of continued Government support. Says Patrick Healy of the National Milk Producers Federation: "We make no apologies for milk prices either. They were up 9% last year, compared with a 12.4% increase in the Consumer Price Index."

Economic Development Administration.This $1 billion program, designed to stimulate jobs in depressed areas,and its associated regional development commissions are being phased out. EDA projects, like the construction of public facilities, end up spending more than $60,000 for each new job; the regional commissions, according to budget officers, duplicate work done by states and municipalities. Democratic Senator Jennings Randolph of West Virginia, principal author of the 1965 legislation that created EDA, protests: "It ignores everything we've accomplished." But many mayors believe that the grants frequently were not effectively targeted.

Elementary and Secondary School Aid.The Administration plans to cut school aid 20% by consolidating 47 educational programs into two direct grants to state and local authorities. Currently, there are separate programs for the handicapped, illiterate adults, the poor, schools undergoing desegregation, and items like teaching the metric system. Atlanta School Superintendent Alonzo Crim is fearful that lumping federal aid into block grants means that it will no longer be targeted toward special needs. But Thomas Shannon, director of the National School Boards Association, says that grant consolidation could be beneficial. "If there is genuine deregulation, this would open the way for creativity and judgment by the local school districts to use the funds as they see fit."

Export-Import Bank. Cutting funds for this agency is an easy way for the Reagan Administration to show that business too must sacrifice. The program' mainly affects some of the nation's large aircraft and heavy equipment manufacturers who sell expensive items overseas. The bank does so by either making favorable loans to the foreign buyers of American goods or guaranteeing financing arrangements made by private lenders. The purpose is to help the U.S. companies compete in foreign markets. Penelope Hartland Thunberg, a Georgetown University trade expert, insists that "the Ex-Im bank helps equalize this competition." Robert Kirby, chairman of Westinghouse Electric Corp., complains that the proposal to cut Ex-Im's funds is "a disaster. The bank has been profitable every year except this one." Other businessmen concede that if inflation were licked and productivity increased, U.S. goods would be fully competitive with their foreign rivals.

Farmers Home Administration. Since this agency spends some $14.5 billion a year among the nation's farmers and in small rural communities, it has strong backing from many of the nation's Congressmen. Reagan is proposing to chop only some $100 million out of FHA's 1982 outlays, but by reducing commitments for grants and loans to build water and sewage systems in small towns, future savings would grow substantially. The agency's most personal service has been to lend farmers who cannot get conventional loans the money they need to plant their crops, buy land or recover from adverse weather conditions. The Reagan Administration contends that other federal programs not aimed specifically at farmers cover some of the same needs.

Foreign Aid. When Budget Director David Stockman first floated the idea of drastic foreign aid cuts, Secretary of State Alexander Haig reacted like a challenged general. A diplomatic compromise was soon reached: a 26% cut, down to a $4.8 billion 1982 outlay. "I am not going to pretend the cuts were a flesh wound," says State Department Spokesman William Dyess. "There was bleeding, but we support the cuts." Strategically important commitments to Egypt and Israel will remain mostly intact, meaning that the cuts will probably come from development aid programs involving the Third World. Some experts argue that the Reagan Administration's emphasis on military assistance to threatened pro-Western regimes, if done at the expense of aid to neutral developing nations, could eventually hurt the U.S. economically. Warns Douglas J. Bennet Jr., outgoing administrator of the Agency for International Development: "The longer we delay the development of Third World countries, the smaller the markets will be and the less successful we will be in competing."

Mass Transit. The political clout of the nation's largest cities will be severely tested as Congress grapples with Reagan's plan to end all federal subsidies for the operation of mass-transit systems by 1985 and to cut capital grants by $270 million in 1982. Some Amtrak officials gloomily predict that the result will be the end of a national rail system by 1985. More immediately, Amtrak expects to have to stop running eight commuter trains daily between New York City and Philadelphia, putting thousands of people back into cars at a time when the nation is trying to conserve on energy. Without federal help, New York's deteriorating, deficit-ridden subway system might have to raise fares (currently 600) beyond the reach of the poor. Los Angeles would lose $67 million in annual aid to its bus system, leading Mayor Tom Bradley to complain: "We can only raise fares or cut service, and neither is acceptable when we've been encouraging people to ride buses."

Medicaid. Health-care costs in the U.S. have risen far more sharply than even the high rate of inflation. One result is that Medicaid, a program that cost the Federal Government about $2.5 billion in 1968, was expected to require $18.2 billion in 1982. Reagan hopes to cut $1 billion out of that amount and save up to $5 billion annually by 1986. He would do so mainly by setting a limit on the federal contribution to the program, which is funded jointly with the states, and letting Washington's support grow only to keep up with inflation. Thus the states would either have to bear most of the burden of any further rise in hospital, nursing-home and doctors' fees, or cut the number of people they accept for Medicaid benefits. There have been proven abuses in the program, mainly involving doctors who overbill for services, and some states have overly generous eligibility requirements. Still, slashing Medicaid, which differs from Medicare in that it aids those people under 65 who cannot afford the care they need, will force many poor people to postpone treatment of their ailments until they require hospitalization. Then someone must help them. A report by the Washington-based Children's Defense Fund argues that "as federal funds for preventive health services disappear, they will be more than replaced by state and county tax dollars spent on far more costly care."

Postal Subsidies. Congress created the semi-independent U.S. Postal Service in 1970, expecting that it eventually would become self-sufficient. Instead it kept running deficits, despite frequent hikes of its rates for delivering the mail. Not until last year did Congress insist on cutting its annual subsidy of $920 million by 10%. Now Reagan proposes to take another $632 million from the subsidy in 1982. The initial cuts would mainly affect county post offices and rural deliveries, as well as low-cost mass mailings by charitable institutions and churches. One endangered service: Saturday deliveries.

Social Security Disability Insurance.Costs of this program have soared from $2.3 billion in 1970 to a projected $19 billion in 1982, and it is ripe for curtailment. Nearly 3 million Americans now draw benefits because they are officially classified as disabled and therefore unable to work. Yet many continue to draw benefits after they have recovered from their ailments. The General Accounting Office estimated in January that up to 584,000 people who are "not currently disabled" still get some $2 billion a year in insurance payments. Reagan has proposed to remove ineligibles from the rolls, put a cap on benefits so that no person can draw from various disability plans, including workmen's compensation and veterans' programs, more money than he made while he was working. Reagan would also limit eligibility to people who worked six of the 13 previous quarters, rather than 20 of the past 40, as now required. The estimated savings: nearly $2 billion by 1984.

Social Services. By merging the funding for 40 separate programs into block grants to the states, the Administration expects to save 25% of the programs' budgets. Services that may be affected range from infant day care to homemaking assistance for the elderly. Opponents of the proposal complain that local agencies will now be forced to jostle for their money at the state level, rather than be assured of regular federal support. Protests Marian Edelman, president of the Children's Defense Fund: "What we have here is a wholesale attack on existing social programs without examining specifically what is working and what is not."

Synfuels. Of all the Administration's proposed cuts, the plan to eliminate the Department of Energy's $864 million in subsidies for synthetic fuel projects may have the least immediate impact. Most of the ventures were still on corporate drawing boards. The Administration now plans to change the mandate of the Synthetic Fuels Corporation by authorizing it to provide funds to experimental pilot projects (until now, it could finance only projects deemed commercially feasible). Nevertheless, Washington admits that the main initiative for synthetic fuel development will have to come from the private sector.

Unemployment Assistance. Reagan has launched a triple attack on two programs that help people who are out of work but could cost the Federal Government nearly $26 billion in 1982 if not curtailed. Most states now provide basic jobless insurance for 26 weeks, while the Federal Government supports another 13 weeks of payments when unemployment within a state reaches 4% or when the national rate of unemployment reaches 4.5%. Reagan would raise the state "trigger" to 5% and eliminate the national trigger completely. After 13 weeks, moreover, an unemployed worker would lose his benefits if he failed to accept an available job, even if it paid less than his previous one. Finally, Reagan would end the ballooning payments, under the trade adjustment assistance program, to workers who lost their jobs because of foreign competition. A former trade official argues that "those unemployed because of foreign competition shouldn't get better treatment than those unemployed because of domestic competition."

Waste Treatment. The Federal Government helps finance local sewer facilities that assure clean waterways and aid community expansion. The Administration proposes that only projects needed for environmental reasons, rather than for growth, will be subsidized, for savings of close to $2 billion a year after 1983. Ironically, this particular cut in Environmental Protection Agency funds would please many ecologists, who feel that subsidized sewer-line construction has led to urban sprawl. But the $4.2 billion program is politically popular with authorities in growing towns, where new sewer lines are a crucial and expensive basic priority.

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