As President, Clinton Will Inherit Ledger Full of Budgetary Burdens
PRESIDENT Bush inherited some very expensive obligations from past administrations - from a savings-and-loan industry in collapse to an obsolete federal telephone system in need of a $25 billion upgrade.
As he hands power to President-elect Clinton, the millstone of past problems is overall just slightly smaller than the one Mr. Bush inherited from President Reagan. It is still far more vast than the burden Mr. Reagan inherited from President Carter in 1980.
The burden of burdens is the national debt itself. Bush was only able to slow this rumbling avalanche. It grew by about 25 percent during the Bush presidency, once inflation is canceled out, to more than $3 trillion. But during two Reagan terms, the real size of the debt doubled.
The debt is felt in the interest payments it requires. In the current budget, which Mr. Clinton will take over, 15.6 percent of all spending will go to pay interest. But that actually represents a slight improvement. Bush took over a budget that committed 16.5 percent of all spending to interest on the debt. By contrast, Mr. Reagan took over a Carter budget that spent 12.1 percent on interest. The national debt was 26.8 percent of the country's economic output in 1980, 42.6 percent in 1988, and 52.5 perc ent this year, according to the Office of Management and Budget.
The next-most-expensive burden from past excesses is the bailout of savings-and-loan deposits through federal insurance. Early in Bush's term, estimates of what it would cost to make good on all those claims ran to well over $300 billion.
But in spite of a slow economy and even slower real estate prices, the total bailout cost now looks like half that amount. The US Treasury estimates it at $130 billion, the Congressional Budget Office (CBO) at $135 billion. Further, the work is at least half done, the cost at least half paid. The most optimistic assessments put the remaining work at about $40 billion in total.
One of the first political challenges, and choices, to confront Clinton in January will be to convince Congress to pay that money to finish the bailout. Bush failed to convince the House to approve his spending request this past fall.
Delay raises the ultimate cost of the bailout significantly. The value of the assets that the government took over from failed savings institutions and wants to sell deteriorates between 15 and 30 percent a year, according to a government analyst. Price Waterhouse federal budget analyst Stanley Collender cites another estimate that every day of delay costs the US Treasury an extra $3 million.
The bailout of S&L depositors, widely misunderstood by voters to be a bailout of failed thrifts and their executives, is not spending that members of Congress find easy to vote for.
Many banks are in financial trouble, too, raising the prospect that their depositors will need to call on the Treasury as well. The banking picture has improved in recent months, however. The CBO estimates that the Bank Insurance Fund will lose tens of billions of dollars over the next four years, but not more than the fund can handle on its own without taxpayer assistance.
A slow, Herculean task will be cleaning up waste at former nu-clear-arms-manufacturing sites. After 40 years of production, much of it not very attentive to environmental concerns, the plants may cost as much as $200 billion to clean up. The Bush budgets have raised this effort to a pace of about $5 billion a year, but the General Accounting Office has estimated that spending will need to rise to several times that amount in a few years to meet federal standards.
A growing problem is the Pension Benefit Guaranty Corporation (PBGC), a pension-insurance fund backed by the federal government. The corporation has currently identified $18 billion in pension funds as "reasonably possible" losses it may have to cover for companies that are underfunding their pension plans. It is already carrying a $2.5 billion deficit of liabilities over assets. Another major corporate failure or two could send PBGC to the Treasury for a bailout.
Elsewhere, people who default on federally-backed student loans cost the government almost $3 billion last year, although that marked the first decline in the default rate in at least a decade.
The $25 billion modernizing of the federal telephone system is well under way and mostly done. An upgrade of the air-traffic-control system that presented Bush with a similar price tag still has a long way to go.