Think-tank plan cuts Washington to bone


WASHINGTON -- In a blunt preview of the looming budget battle in Congress, an influential conservative think tank yesterday urged Congress to scuttle nine Cabinet departments, overhaul Medicare, cut $152 billion in taxes and shift vast federal responsibilities to the states and private sector.

The fiscal manifesto released by the Heritage Foundation, which helped develop the "Contract with America" that dominated the first 100 days of Congress, is a bid to shape the deficit-cutting efforts that will assume center stage when the House and Senate return to work soon.

The think tank has been the nerve center for conservative policy in Washington since the Reagan administration and claims credit for key elements of the current Republican agenda, including the $500-per-child tax credit that recently passed the House.

Because of that track record, the Heritage plan is distinguished from the multitude of rival ideas now floating around Washington and provides a window into the debate that will consume Congress for much of this year.

"This budget is essentially a handbook for the leadership on Capitol Hill today," Stuart Butler, vice president of the foundation, told reporters yesterday, as the group unveiled its blueprint, titled "Rolling Back Government: A Budget Plan to Rebuild America."

Many members of Congress wish to reduce the federal government and cut taxes, he added, but when it comes to the particulars, "They have only the vaguest notion of how to do these things."

To achieve a top-to-bottom overhaul of government, the think tank proposed a handful of strategies yesterday that it said would lead to a balanced budget by the year 2000, while also granting tax cuts for families and corporations and increasing defense spending.

Among the proposals:

* Privatizing the government's commercial activities, from transportation to finance. Amtrak, much of the Postal Service and National Weather Service, federal helium reserves, real estate holdings, nondefense aircraft and a $200 billion loan portfolio all would be shifted to private hands.

* Eliminating "corporate welfare." The plan would lacerate dozens of programs, including agricultural subsidies, energy research activities, export-credit guarantees and more.

* Under the plan, defense spending would increase by $130 billion over White House plans, reflecting current expenditures plus inflation.

* Shifting programs to state and local governments. More than 70 anti-poverty programs would be transferred to the states, financed by a block grant with few strings attached.

Nine Cabinet-level departments also would disappear, their functions being either folded into other agencies, privatized or sent to the states.

For example, nuclear programs run by the Energy Department and the entire Department of Veterans Affairs would be taken over by the Defense Department.

The Federal Communications Commission, Interstate Commerce Commission and Small Business Administration would vanish.

Heritage Foundation analysts say only a few, fundamental core functions of government should retain Cabinet-level status: the departments of Defense, Health and Human Services, Justice, State and Treasury.

This year an over-arching question is where the ax will fall.

Yesterday, Heritage Foundation analysts suggested that part of the answer was in Medicare, the health care program for the elderly.

Under the Heritage Foundation plan, Medicare would be transformed, with beneficiaries having the option of accepting federal vouchers that could used to purchase private health-insurance plans.

In addition, premiums for the part of Medicare that covers physicians' services would be increased.

These Medicare changes, the foundation said, would yield more than $192 billion in savings over the next five years.

The savings in Medicare and other programs, adding up to $799 billion over five years, would yield another $89 billion in savings on interest payments, due to lower debt, and would allow for a program of tax cuts similar to the package that passed the House earlier this month.

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