President's Program for Economic Recovery

The President's program for economic recovery is a multiyear plan which, if it is to be implemented, will involve many individual legislative actions by Congress. Acting on the plan will involve trade-offs between the need for a longer term, stable commitment by the Federal Government to people who participate in Federal programs versus the need for Congress to control the budget. The stated basis for the plan is that reduced taxes, reduced spending, and a stable slower rate of growth in the money supply are essential for a return to more stable prices and sustained economic growth. GAO simulated the effects of the plan using two large private econometric models of the national economy. Both predict less growth, more unemployment, and more inflation than is anticipated by the Administration. If tax reductions are to be enacted, they should be accompanied by substantial constraints on expenditures in order to minimize the risk of a further acceleration of inflation. Several general areas which received little or no attention in the President's program included: tax expenditures, the indexing of Federal programs, audit findings and debt collection, and several programmatic items. Two examples of the specific cost savings proposals reported by GAO are the repeal of the Davis-Bacon Act wage requirements and the revision of the social security benefit formula to eliminate the advantageous rate of return enjoyed by short-term workers. Areas of the program which GAO supports are the elimination of unnecessary regulations, the extension of user charges, reform of the Federal Financing Bank, reduction of defense costs, greater use of block grants, and reform of unemployment programs. GAO has reservations about the program in the areas of executive pay, budgeting for capital investments, productivity improvement, exports, energy, and medical programs. Administrative reforms which should be given early attention are: budget reform, including personnel cost controls; congressional oversight; and Government organization and operation.