oversight

Federal Spending--Is It Out of Control?

Published by the Government Accountability Office on 1971-10-01.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

           Address by' the Comptroller      General of the United States,
           Elmer 8. Staats,    to the Commonwealth Club of California,
                          Sheraton-Palace     Hotel, San Francisco
                                       October 1, 1971                                                          yd
                                                                                                          P I
          \ .                    FEDERAL SPENDIW.G-IS               IT OUT OF CONTROL?3
I                         1
I     k                                                                   .
i                  I a$preciate           the invitation            to speak befo-re        this     distinguished

          group.       The Commonwealth               Club of- California             is well      known for          the

          contributions            it    has made over         many years.

                   Your secretarjl           has asked me to speak on the subject

          "Federal        Spending--Is          It    Out of Control?"            I hasten         to say that

          I cannot        give     you a definitive            answer.        And even if          I attempted

          to do so,           I doub,$ that      many of you would             agree y/ith         my answer,
                                   2;_.
          The reason           is bisic      and simple:            The .ans!r!er depends on your

          philosophy          of government-whether                  taxes    are too high,          whether
                                                                       e
          inflation           is the paramount            issue,     hether     the Vietnam          war could

          be brought           to a close       more rapidly          than    the President's             plans

          con$emp7
                 ate )            or whether         you think       the needs of our inner                cities--

          sy~ribol of our irwense               social       probiems--have           been neglected            by

          the Federal            Guvern~rnt.

                   Perhaps        I should      state.     both nv disqualification                 and

          qualification             to speak on the subject.                  Your fellok/         Californian,

    q//f caper  Wei nberger, Reputy Director of the Offic: or' 14anay2rr?ent 2.7
    /
         and Gudgct and a fctmer speaker before this forum, and George Shultz,

          the Dfiw.tor            of that      Office,       are the key personai i t-ies              presently

          invalved        in advising          the President          on cur-rent       and future         budget

          policies.            60th are able!,           entrcted      with    this     highly      important

          and complex            role.
                After     serving     more than 20 years                            in the Bureau of-the
    . i
     Budget,          I have been concerned,                      for      the past 5 years                           as Comp-
     i
    itroller          General,      with     advising             the Congress on how well                                 the
     executive           branch agencies              have spent the money appropriated
     to them.            Some call         the General             Accounting                 Office,             which I
     head, theVIWatchdog               .for the Congress,"                            Having this                     respon-
     sibility           and having         played      a personal                   part--as            Deputy Direc-
     torof        the Budget-- in assisting                        four        Presidents                  in the prep-
     aration          of 14 budgets          for      the Federal                   Government,                 T have--
     quite       naturally--        retained          an active             interest               in and concern
    with        the subject         of Federal           spending.
           A decade age, when John Kennedy became President,   the
     Federal budget&as   approximately $98 billion,  Ten years

,    later,
        .         in .1970, the budget had almost doubled at $197 bil-
     lion.        The 1972 budget, now before
                                           +   the Congress, calls f-or
    expenditures             of &$232 billion,                    In this            lo-year            period,           1961
     through          1970, we have had a budget                          surplus             in only 1 year
    and have had cumulative                        deficits             totaling           more than $60 bil-
     l?on.
                Perhaps I should             update       these           figures            for fiscal                 year
     1971 and the current                   estimates             for     1972,             The actual                 deficit
    for       1971 was $23.2 bill3on--                   sharply            upward from earlier                            es-
    timates,            largely     Secause of the downturn                              in the economy.
    The President's                budget      for     fiscal            year
                                                                     '72, submitted last
                                                                         \
    january,            estimates     a deficit           of $11,6 billion.   Currently
    the expectation                is that         the deficit              w-ill        climb          to a much
    higher        figure--        some estimate           as high as $25 to $28 billion--
    primarily            due to two considerations:    the proposed tax re-
    duction           that is a part of the President's    Na.7 Economy
                  8

                                                              2

                                                                                      _._ ._-__._- ._..-_ __.._-. -
                                                                 0                                                             a
                           Program             and increases                         in     the      President's               budget          to approxi-
                           '#ately            $3 billion                  due to added                   expenditures                 by the       Congress
                           fo appropriation                             bills          acted        upon        to date,              Thus-there          ,iS
                           a possibility                         that         in 2 fiscal                years       we will              add deficits
                           totaling               almost             as much as .those accumulated                                        during    the pre-
                           vious          10 fears.
                      -.
                                       The President's                           current            budget         requests               new spending
                           authority                totaling                  nearly            $250 billion               which,          added    to the
                           $260 billion                     authority                  of previous                years,          provides         the    execu-
                           tive        branch            with           spending                authority          of over           $500 billion--to
                           be spent               in the years                       ahead.
                           THE BUXET                   IN THE FUTURE
                                       The Feder$                       budget            for      future         years        is    further        compli-
                           cated
                               .  by 1the. fact     that many of our commitments     have become
                           "fixed,  " "built    in,"    or, as some-a would call it, "uncontrol-
                           lable" --the-very      word in the .topic    selected for today's
                           discussion.                      To be sure,                    much of          our budget               has increased              as
                           the     result             of population                        growth,          inflation,               an increasing
                           number           of veterans,                        and an increasing                     number              of beneficiaries
                           entitled              to social                 security                and other          pensions,
                           President                Nixon,              in transmitting                     his      1972 budget,               pointed
                           out     that,           during               the     next         4 years,             economic           growth        should
                           increase              Federal                receipts             by $86 billion.
                                      But,         he hastened                       to add,         the built-in                   or uncontrollable
                           costs         in      the budget                   will         limit         severely           the      ability        of   any
                           President
                              s                    to alter                this           figure         over      the     next       5-year        period.
                           He stated               that:
                                     Less than     ten percent   of the receipts   that our
                                     current    tax system is expected     to produce   in 1976
                                     will    be available    for all the new programs     to be
                                     in:roduced      between now and then.


                                                                                                     3
--..--.______.__
             ^_.,_-.-.-.-..---.-     ,“__ ... ._-~.-.---.---..    -. -- ._.. . . .                                         . ._. - - .,
This      is      a direct              quote         from         the budget              statement                in which           he
further           estima.ted             that         about         l-percent              of calendar                year
1975's       .eeonomic resources  would be available                                                    for         new programs.
               -
            Perhaps   some of you will  conclude   that                                                 I already                have
 answered                th& question                    pos.ed in          today's           subject,              namely,
  that      Federal              spending             is     out      of      control          and that              I could
 stop       right             here      and not            belabor            the     subject:          further.                 But
  the     issue           is     not      that           simple.           Whether            Federal          spending               is
  too high              or      too low must                 be judged              on many counts.                        It        must
 also       be related                  to      the       growth       of      the      economy          and the need~s
 which           Gawernment              will            be called          upon           to supply           if     we are           to
 have a stable                       sc$ety           and if          our      economy           is     to continue                   to
 prosper            and grow‘.
 TKF, HJDGET'AND THE ECONOMY
                          -
            It      is        a truism             that      the budget               is      affected              by,    and has
 a sizable                impact         on,        economic            conditions.                   The 1971 budget
 deficit,               for      example,             was increased                   by nearly               $6 billion
 because            the         economy            did     not      perform           as anticipated.                          At     the
 same time                a sluggish                economy           has placed               more people                 on wel-
 fare       rolls,              illustrated                by the          fact       that       in     February                of
 this       year          14.2        percent             of,the       population               here          in     San Fran-
 cisco           were         receiving             public          assistance.                 A sluggish                 economy
 also       has resulted                     in     higher          payments            for     unemployment                     com-
 pensation,                   lower      agriculture                  prices          requ iri;ig             more money for
 price           supports,              and higher                 interest          rates        which             boosted           the
 Govekment's                     cost        for      borrowing             money.
            A major              step        was taken              by President                Nixon          this        year        to   .
 relate           his         economic             forecast           or goals              to the       level            of     the
 budget           and         the budget                 surplus       or deficit               forecast.                  He used
 the      term          "full         employment              surplus."
    *_                                                                                                                      -,
                                         0                                                          0
         This       means that,               although          the budget,                 in absolute                 terms;
          shows a deficit of $11*.6 billion,  it would show a small
            i
          surplus if the economy were to perform   at a level required
          to reduce           employment              to about           4 percent.                 In     the         language
         of      the economist,                 the budget          was calculated                       to have a stim-
         ulating        eff'ect         on the         economy           and to serve                the      objective               of
         bringing         economic             growth      back          to an acceptable                     level.             In
         more specific                 terms,         the downturn                in     the economy               has-con-
          tributed        to spending                 programs           for     emergency               employment              as
         well       as expanding               welfare          costs,          to which            I have         already            re-
         -ferred.

                    Viewed        in    the      perspective              of      the       gross        national           product
.
          (GNP),      the Fed&?                  budget         picture           is     quite       different,                  Dur-
         ing.the        W-year           period          1961-70,              which        I have        taken          as my
         point       of reference,                the Federal                  budget,        as a percent                  of
         GNP, increased                 only      slightly--from                     19.3     percent             to     20.6
         percent--       while          the Federal              debt        held       by the           public          actually
         declined        from          47 percent          of      the GNP to 30 percent,
                    Of course           I am talking              only          about        the Federal                Govern-
         ment.        State        and local            government               debts,          as well           as ex-
         penditures,           have           increased        much more rapidly.      Indeed,                                   one
                                                            ..
         of the       reasons           for     the      in&ease    in Federal    expenditures,
         overall,        was the need                 to provide                increased           assistance               to
         State       and local           goverrments,               Federal             grants-          now represent
         approximately                 20 percent          of     the        total        State          and local           rev-.
         enues ,       This       year         grants-in-aid                 represent            nearly           15 percent
         of   the     total       Federal          budget,          or about             $30 billion.




                                                                         5
1

1   i                                              -
:       .
                                      e                                               e
                           c
                        One writer         has recently-remarked,                  facetiously,          that     the
            mayors of the cZties                 *facing     .financial        crisis        are besieging
            their Governors for funds,    In turn, these Governors,                                         whose
            States also are facing financial    crisis, are spending                                        their
            time besieging             the Federal          Government for              funds,       The Fed-
            eral        Cove&men-t2 in turn,               is facing      a $25 billion              deficit.
            FINANCIAL ASSISTzMKE TO STATE AND LOCAL GOVEFXHENTS
                    .   The national          debate now taking           place       on grants-in-aid
            and revenue             shargng     is of special          concern,           particularly           be-
            cause of the question                 of accountability                 of these--your--
            tax dollars.
                        The 1972 bud&et          states      that    "this         year promises          to be
            a turning            point+n       the history       of our Federal               system" and
            notes        that     the President's          proposals         for     financial       assis-
            tance to State and local                   governments,           including           revenue        shar-
            ing for        fiscal      year     1972, tota1+$38.3             billion,           an $8 billion
            increase            in 1 year.
                 The basic question    focuses on the primary purpose of
            such assistance.     Is the primary purpose to support programs
            for specific   na~tZona1 needs, financed,
                           --                          in substantial part,
            with --
                 national            revenues      and accounted             for     to the National
            Government?   Or is theiqprimary purpose .equalization                                         of
            the tax burden under a system of federally  collected,                                         lo-
            cally        admtinister~d        revenues?
                        The President,         in his February            4 mesiage to the Congress
            on general            revenue     sharing, pointed            out that many people
            believe        that     the best way to hold Government accountable                                   to
            the people            is "to     be certain       that     the taxing           authority       and
                                 m                                              e
     Will        special     interests--those                  concerned,      for     example,     with     --
      child       care,    aid to the mentally                   retarded,      or water      pollution
      control --be         satisfied         to allow           the need for          these programs
      to be determined              by the State               and local     governments?
                 Whichever       way the issue turns,_our                    attention       has been
_     focused         sharply      on the capability               of State and local             govern-
     ments to audit              programs and to evaluate                    their      effectiveness.

                'One of the arguments               made for        revenue      sharing      is that
    it    would place greater                 responsibility               on local      governments
    to determine            how governmental               programs         should     be carried
    out     l    It
                  is difficult    to argue with the principle  of decen-
    tr,alization.        I believe that this issue should be looked
                           R
    at from the standpoint          of whether general revenue sharing
    may not actually                weaken one of the incentives                       to consolidate
    or modernize            local        government        structure.
    ‘THE COMMITTEEFOR ECONOMICDENELOP"1ENT
                                         STUDY
                In its     recent        report     the Committee for                Economic Devel-
    opment pointed               out that         nearly       two thirds       of our entire          pop-
    ulation           today are concentrated                   in 233 metropolitan            areas,
    compared with               only 55 percent            in those         areas in 1940.          Yet
    in 1967 the metropolitan                       areas contained            nearly      21,000 units
    of local           government,         or Zn average            91 local         governments       for
    each metropolitan                area.         The extremes            are represented         by the
    Chicago metropolitan.area                 with 1,.113 local‘ governments,
    Philadelphia            with     871, Pittsburgh   with 704, aEd New York with
    551, contrasted               with     20 other        metropolitan          areas with        less
    than 10 local               gosernments         each,




                                                           8
-----             .-.                                                                                             -




                    Perhaps this          audience       is aware ,of the              large     number      of
        Government entities                 in the San Franc,isco                   Bay area.        The nine
        counties         in the bay area include                     9.2 cities,        100 school         dis-
        tricts,         300 water        and sewer districts,'12                      special     regional
        districts,  and some 800 special districts,
                                                s      for a total of.
        more than l=,300 entities,  Of particular   interest   is the
        fact that this figure does not include 2,200 additional       spe-
        cial      -districts      which-have            legal      status     but which currently
        are inactive.
                   The report       of the Committee for                    Economic Development
        concluded         that     "the     existing           system of overlapping               local
        governments            results      in    a    poor match between needs and re-
        sources         and perp?ctuates              waste,      inefficiency,           and confusion?
        The report         noted that            the States          had been very             slow in ad-
        justing         boundaries         of local          governments          to meet the needs
        of metropolitan             areas and recom&nded                     that      both State-         and
        Federal-aid            systems be used as incentives                          to reduce the num-
        ber of local             governments           and     stimulate      local       government        re-
        organization.
                           a
WHAT ABOUTTHE VIETNAM "DIVIDEND"?
         You may ask whether              my analysis         overlooks          the savings
that     will  be achieved as the planned withdrawal  from Vietnam
takes     place.   It is true that the phasedown will result   in
lower     costs     than would otherwise              be the case, but provision
has to be Lade for                 increas-ed     costs     of defense           as we move
toward a volunteer                 army, as inflation          takes       its     toll     on
weapons systems costs,                 and as we provide            for     needs of the
Defense Department'that                  have been deferred             because of Viet-
nam war expenditures,
         But the principal             answer to the disappearance                        of the
so-called         fiscal      dividend       is to be found in the growth                        of
programs        designed       to deal with         increased       social         and environ-
mental concerns--education,
          1                     manpower training,   health, wel-
fare, crime control , pollution    control,
                                    1         and so on, The list
is almost >endless.    The Federal budget this year for human
resources        programs will           be greater         than that       for      defense,
Almost 50 percent              of the 1972 budget will               be devoted             to so-
cial     and envirolnmental            programs,          and the end is not in sight,
This is i-ndicated             by the titles         of some of the bills                   pending
before      the current            session      of the Congress,
        National       Water Qualit;            Standards     Act
        Universal          Child     Care and Child         Development           Act
        Urban Education              I~mprovement Act                  .
        Comprehensive              Community College         Act
       <Clean Waters Commitment Act
        Economic Opportunity                 Act Extension
        State and Local. Government Modernization                            Act
        Health Security Act
1       L

I   .
                                             0
                      Amendments to the                    Social         Security               Act    (including                  family
                        assistance)
              ./
                ,/ -Emergency               Employ-r&t            Act"
               i      School         Children            Assistance            Act           ,
                      This      is perhaps               why one of            the       White         House assistants
            remarked,           npt        too    long     ago,        that        the    Vietnam          dividend                 is as
            "evanescent              as the         fog    at     San Clemente."
            CONTROL OF FEDEPAL SPEBJDING--WHAT DO WE m?
                      So we return                tc     the    basic         question            of priorities                     in
            our    society:                How much should                Government               do?          and,         more
            particularly,                  How much should                the Federal                  Government                  do?
            Again,      we cannot                answer        this      question          in absolute                      terms.
            We must          ask:          In relation            to what?               Compared          with-what?
            What      are     we doing'that                can be dispensed                       with?          Can the pri-
            va.te. sector            do more?
                      I can hear             someone answer                   the    question:                  llCompared
            with      taxes         that     I can afford                to pay;          I am taxed                  to death
            already."               That     is     certainly            one test          and a practical                          one.
            But we must              also        look     at    our needs            as a society                     in.relation
            to our personal                  and family               needs;        our needs             for     new housing,
            new business              plants            and equipment,               better            transportation,
            betterlawenforcement;                       and, of course,     the noisy                                  concern
                                                            0
             about      pollution                and environmental   controls    that                                  is     evident
             on all         &sides,          Unless        we meet the               basic         needs         in     these
             areas,         business             cannot        prosper         and our            tax'burden                will         in-
             crease.
                  9




                                                                              11

                                                                                                                                               . ._._. .,...._“- _.-- -
            I hope that up to now none of you listening                             to my dis-
cussion        of Federal      spending
                                    1    feel like              the man who went to
see a lawyer             about getting  a divorce,

            'Why do you want a divorce?"   the lawyer asked,
            t'Because my wife talks all the time."
            What does she talk about?" the lawyer then-
            asked.   "I'hat"s the trouble; she never says."

            And that's       the trouble--or          difficulty--with              our elastic
subjekt        today.        Qne can talk         a-lot     about     it,     but can things
be said that            are encouraging           or helpful?           In-summary        of what
I have tried            to say thus far,   we would be incorrect                        to c-on-
elude,        given     the broad perspective   of the Nation's                        demands
and needs,            that   F$deral      spending        is out of control;            nor are
there        substantiv&reasons             for    anticipating             that   the volume
of Federal,spending               will     be reduced;        indeed,         nearly    all   the
pressure        curves       are upward.          That+ does not mean, however,
that        the money the President               requests,. and the Congress-+ap-
propriates,            is spent    as efficiently            as it     ought to be; much
is -being done to improve                  Federal        management and administra-
tion;        much more can be done and must be done,                            So let us now
turn        from the overview            of Federal        spending         to specifics.




        P
 ./      When we begin                 to e-xamine into                Federal        spending          in specific
                                               a
arsLas, such as Medicare or Medicaid,  or by the big departments,
  1
such as Defense--where   we have had some serious cost problems--we

find     situations             where particular                 aspects         of Federal             spending      have

not been contkolled                         properly.

CONGRESS
--      AND
          -----SPENDING
         it     is proper             to ask at this             point        about      the role          of the Congress,

Doesn't         the Congress                 have the final             word as to how much money is to

be spent?--and                 for     what?         The answer          is in        the affirmative--although

there         should     be heavy underscoring                         of the fact           that       many, if       not all,

of the uncontrollab@s--such                                as the increasing                 costs        that     I have

alregdy         mentioned             for      interest,       welfare,          priie       supports            and so on--

which         face     the President               in the budget              are     also      facts      of life         for

the Congress.

         Within         the area which                   is subject       to discretion                 from year          to year--

about         one third         of the total--the                    record      of the         Congress in maintaining
tight         reins     on the budget                   is a good one.               To be sure,           the Congress

has been in the forefront                               in pushing       for        increases        in    Federal

spending             far special             purposes,       'such'     as elementary               and secondary

education,             and for         medical           research.        Overall,           however,            the congres-

sional         record      in dealing              with      spending          authority         over      the lo-year

period         has been one of bofding                        the line;             in fact,        the trend         is toward

reduiing,             rather         than      increasing,            the President's               budget.          The

Adxinistration's                     1977 request            PIas reduced            by $1.6        billion.
                  As evidence                 of growing              congressional                   scrutiny,                   the      Mil-
      .I
     itary         Procurement                  Authorization                 Act      for      1972 has been under
     debate             for      the     past        2 weeks.               Here     is      the      schedule               of debate
     of last             Wednesday,                 as reported              in the          Congressional                        Record.
                  --A 2,hour    debate on an amendment to reduce                                                        funds             for
                     the Navy's   F-14. aircraft ;pcogram,
i
%
i
                  --A l-l/2-hour                     debate on an amendment                               barring            funds              for
>.                   deployment                 of    the ABM system.
1             .
3
                  --A 2-hour debate on an amendment limiting        research
,;                   and development   funds for the Army's main battle
                     tank and a proposal      requiring the Department    of De-
                     fense to provide    the Congress with a 5-year     projec-
                     tion on defense   costs,
                  The decisions                     to accept          or reject              these             amendments                 are less
     important                 for     o&r discussion                  today         than       the        fact         that         these
     amendments                 are      debated            at all.           Only        a few years                   ago,         the
     entire         defense              budget          would        have-been              acted         upon         in a single
     afternoon                 with      virtually            no change.or                   challenge.
                  There         are a good many signs,                             currently,                   that     the         Con-
     gress         is         increasingly               restive        as to whether                      it      has the               capa-
     bility         to exercise                     these     oversight              responsibilities.                               There
     are      those            who would             say that          the     Congress              almost             has an in-
     feriority                 complex,              Members          of Congress              feel             that     the         knowl-
     edge,.         the         information,                 &d       the     data        on the           Government's                         op-
     erations             are         in the         executive          branch,               They are                 not        always
     certain             that         they     have         the    capability              to review,                   react           to,
     and pass             on the             data     and the          recorLmendations                         coming            from        the
     executive                 branch.              The fact        that       the        executive               branch             is         in
     the      control                of one party             and the          Congress              is         in the            control
     of another                 plays          a part         in    this,          although            I think               it     goes
     much degper                  than        that--to            some of the              concerns                I already
     have meationed.
        .i      The growing       size     of the budget3 the increasing concern
      about taxes        across        the'country,  the doubling of the number
      of/persons       on welfare             in 10 years,             and ,the        plight     of the      -.
      cities      and the States              in terms of being                 able to raise          funds
      to carry      out their          responsibilities--all                      these have piayed                a
      part.       A recent       congressional                 reorganization             act--The     Legis-
      lative      Reorganization              Act of          1970--was,        in part,         an effort
      to imcrove       the machinery              of the Congress,                 because there             are
      those      who feel      that     the Congress                could do a great              deal more
      and could       do its      job better             if      the members could               improve      the
      functioning        of the legislative                      branch      itself.
      THE ROLE OF GAO
                We at GAO a&           a part      of this,            in the sense that              we have
      .the largest       professional             staff          available        to the Congress:
      about 3,100        employees,            most of whom are located                         in the field,
      where operations            are being         carried            on.      GAO has 15 regional
      offices,       including         one in San Francisco,                      and five        offices.
I     overseas.        The staff             in the Washington                area is decentralized
I
  I   and located        at operating  agency sites.   We do this to have
  !
 IL   better      access to information,     to enable our staff to get
 i    b.etter     acquainted          with
                               the persons in the operating  agencies,
!f                                *
      and to obtain a better un&erstanding   of the Government pro-
j                                            About 40 percent of our
      grams and activities  that we audit.
1     auditing       staff     work on Department                    of Defense programs;                  about
I
i
      50 percent       work with             the civil  agencies; and about 10 percent
I
      work-on      international              programs.   That's a rough breakdown.
I
          Although               GA0 has an independent                                   status          and has its                 own
charter             and the         right'to                 review          pr'ograms             at     its      own discre-
tion,       nevertheless                       it     also       serves            as an arm of the                       Congress.
We are       required,                by law and by practice,                                      to try         to help             not
only      the        Congress             as a whole                but       also          its     committees,                    subcom-
                      C
-mittees,            and even             indivi-dual               members               of Congress               on matters
involving                Federal          operations.
        'More            and more we are                      giving          help         to the          Armed Services
Committees                and the              Appropriations                      Committees,,                 as well           as to
other       committees,                   so that             today          about         25 percent               of      our over-
all     effort,                in professional-staff                               terms,          is     in response                 to
s.pecific            congressional                     requests,                   In the          most         secent           fiscal
year--19?1--GAO&ent                                 to the        Congress                187 reports,                  most        of
which  described
            1 .                     needs            for      improvements                      in the management                         of
agency programs                     or activities,                           We also              made 287 reports,
made specifi~cally                        at        their        request,            tb         c.ommittees             or members
of Congress.
NEED FOR ACCOUmfiBILITY
          You might                ask:             How does GAO decide                            what         areas       it      gets
into?        I am speakin ig here                             of matters                  that      GAO undertakes                        on
its     own initiative.                             We try        to anticipate                     where         problems                are
developing.                     For example,'                 soon after                  the      Medicare             program
started             in    1966,      we sensed                   that        the     cost          estimates             were being
exceeded             very        rapidly.               We undertook         at that1 point                               a number
of studies,                    in both          Medicare            and Medicaid,    designed                              to as-
certain         what           ways we could                     suggest            for      reducing             the      cost           of
medical         care,              I am glad                to    say that                we came up with                    what          can
be described                    as truly             enormous            sax?ings            in this             area.            We have
attempted                the     same thing                 in the           manpower-training                          field,
                .



                                                                        16
          GAO is           shifting           more and more of                       its      emphasis              toward
    /
social programs,   because they. are becoming an increasing
  i
area of Government    expenditure.  -By their very nature,
these       programs             are     difficult               to examine,                particularly                  when-
we try        to assess
                  c       the accomplishments                                      or benefits                and to as-
certain        whether  established    objectives                                        really        are     being
achieved.                We feel         that        both        GAO and the agencies                          are        going
to be' handicapped,                     particularly                    in   the         social        welfare
fields,          until          we get        better         criteria              for      evaluating               program
effectiveness.
WEAPONS PROCUREMENT
          To improve               accountability                     in weapons             procurement,                   about
which       you have I-&ard                   so much in                the past            2 years,           GAO has
begun       to make special                     reports           on major               weapons        procurement
to help          the Congress                 determine               @at     is      happening               in     this
costly        area.             The first            two reports              will          cover       not        only          cost
growth        but        also      variations               in    performance                from       original
specifications                   and any important                       slippages                in   time        sched-
ules.
          Over      the      past       year       or so,             the-office             of the          Secretary
of Defense               and the        military             services          have been                engaged             in a
substantial               effort        to      ide?itify          and solve               problems            that         have
affected,           adversely,               the     acquisition               of major                weapons            systems
in terms           of performance,                   delays'   and increased.    costs.    Gen-
erally       the      newer         weapons          procurements    are following      a slower
development               pace,         Procurement                practices               are more conserva-
tive      than      those          of   the      earlier           periods.                The new areas                    of
prototyping               and of        parallel             development,                  including               shifting
the      form-of          contracting,               are         desirable           moves.             Because             many
               .

                                                                 17
of        the current            programs                 are      in early          stages           of    acquisition,
evidence             is not          yet         available           to adequately                    assess          the    re-
    i
su,lts of            changed          concepts.                    The Department                    is not       yet       out        of
t&         wdods,
            Closely         associated                   with,       and perhaps                    even    implied          by,
the -question               of r&ether                    the      Federal          Government              has control
over        its      spending              is,      I believe,              the      disturbing                fact      that
 inthe present                   period             there          appears          to be growing                 distrust
      .
of government--at                          all      levels--in              the United                States.
            The twin            problems             of need for               a strong               economy           and need
for        confidence            in government                      go hand          in hand,               For       the    country
to concentrate                   on meeting                  the     needs          of        the    reordered           priori-
 ties,       these       two bssic                 problems--too                    much inflation                    and too
                             - ZI
                               I
 little           confidence     --will                   require          mitigation                as soon as pos-
'siblk       and golution                   within           some foreseeable                        period.            I believe
 that       a strong            economy             is     not      attafinable                without         a renewal               of
confidence               by the            American              people       in their               National           Government.
Such a challenge                      could          not         come at           a more difficult                     time.
 The new priorities                          are         largely       in areas                where       neither          Gov-
 ernment           nor    private                enterprise            as yet             has had nv!ch experience.
 Someone has observed                             rightly           that      it         is    easier       to get          a man
 on the moon using                         a technical               program              largely          dependent              on
 machines            than       it     is        to devise            a welfare                program         for      millions
 of persons              that        cm          be managed            adequately                   and administered
 effectively.




                                                                      18
:   .
                                  0
                I find        myself        in agreement with           the observations             of a
        member of the Board df Editors                         of Fortune,        Max Ways; that
        the overriding                  challeng, e of the. seventies           will      be that      of
        improving          the quality             of government.        To agree that          there
        has been 5 decline                  in the reputation           of government-is             not to
        concede that           there        has been deterioration              in government.
        The administration                  of government          has become more difficult
        in recent          years,         because government           is trying        to provide           a
        far wider          variety'of          services       than ever before,            many of them
        more or less           in full         public     view,
        COi~CLUS-ION
                The focus               of my remarks        today has been directed                almost
        exclusively           to--t&he responsibilities                of the Government in im-
        proving      its      controls         of,    and accountability           for,     Federal
        spending      and in achieving                  better+management          to that      end,
        LPl_reto the short                time .available,         I have been obliged              to rel
        frain      from any meaningful                  discussion      of the increasing,-but
        related,      responsibilities                  of business management in the con-
        trol of Federal spending.                        In the larger sense the control
        rests with the electorate                       and the leaders         in business,           fi-
        nancial,      industrial,              and professional          endeavors,         who have
        important          contributions             to make,
                What is the future                   going    to cost?      WC do not know.                  We
        need to do everything                      we can,    in all    sectors        of our society,
        to be as fully                  prepared     as possible       to make the best judg-
        ments for          the programs--private                  and public--we          undertake,
        to meet changing                  need-s and changing          values     designed      to
        achieve the new goals which o-ur changing values   have thrust
        upon us,   If we do so, we will retain control   of Federal
                                              0
        spending and       remain masters of our opin house.
                               qii.11
     It was a pleasure    for me to be here today and to talk
to and meet with   you.   Thank you all   very mch,