When pressed by Walter Mondale to lay out his plan for budget savings during last Sunday's debate, President Reagan mentioned that "we have 2,478 specific recommendations from a commission of more than 2,000 business people in this country through the Grace Commission that we're studying right now, and we've already implemented 17 percent of them that are recommendations as to how to make government more efficient and economic."
On a number of occasions, President Reagan has cited the Grace Commission's recommendations as his solution for the deficit and hence his alternative to a tax increase. A neat solution it appears to be -- a way to eliminate a problem, without causing any pain. And a solution that taps public perceptions enough so that it doesn't appear outlandish -- polls show that the public believes about 50 cents of every tax dollar goes down the drain as waste.
The Grace Commission's claim that one could cut funded spending by $424 billion over a three-year period simply by eliminating waste came under some attack when the report was released last winter. Critics pointed out that many of the big money-savers involved substantive policy changes, such as reducing payments under Medicare or dramatically changing federal pensions. Furthermore, the administration's commitment to the Grace recommendations was hardly enhanced when Congress had its first chance to vote on a major commission recommendation -- to charge customers market rates for electricity produced by government installations such as the Hoover Dam -- and the administration supported continuation of this subsidy to the West.
I have been examining recommendations by the Grace Commission in areas that do not involve substantive policy but do fall into what most people have in mind when they think of government waste -- contentions that it costs the Veterans Administration ld chills." Buildings Service). Another 800 manage GSA design and construction, overseeing the contract process for construction of new buildings as well as repairs and alterations of existing buildings (there are around 3,000 of the latter done a year, for some of which the design work takes place within GSA itself).
The people managing design and construction for the insurance company work in a different division and weren't included in the employment figures the Grace Commission provided. Thus the number of professionals working on building management at GSA is really around 2,700 rather than 5,000.
Although all this indicates that the Grace Commission is monumentally mistaken, it is difficult to play around with these figures to arrive at a genuine comparison. One would need to know how many professionals the building management contractors employ, and the insurance company itself doesn't know that.
Beyond that, the nature of the GSA portfolio is different from the insurance company's portfolio. Over two-thirds of the GSA buildings are leased rather than owned, which requires people to work on bidding initial leases and on lease renewals (neither of which the insurance company needs to do), but does not require government-provided building management services. More than 1,000 of the GSA buildings are (owned or leased) local Social Security offices, which are considerably smaller than properties an insurance company owns. GSA officials would themselves concede that they probably have a larger staff for comparable functions than a private-sector counterpart, because GSA requires more levels of review on contracting and leasing decisions to ensure due process and minimize corruption. But the difference is nothing like 17 to 1.
The other cases I examined generally told similar tales. There certainly is waste in government. But my research suggests that horror stories are almost always wildly exaggerated. The notion that we can make a substantial dent on the deficit without pain simply by cutting waste is comforting. But it is a myth.