All These Numbers

On November 4, 1980, I pulled a rental truck into an alleyway behind Carmen Avenue, just off Clark Street, in the Andersonville neighborhood on Chicago’s north side. Already dark and with a cold crisp breeze blowing off Lake Michigan, my roommates and I began the arduous chore of carrying our belongings up to the third floor apartment that would be our new home.

Among the first things to be carried up the stairs was a small black and white television I had purchased with money from my paper route back in 1974. Propped up on boxes, we plugged it in, and before we were halfway through unloading the truck, we learned that Ronald Reagan was going to be our new President.

While I know that many of you out there greatly admire President Reagan, you should know that I had worked on John Anderson’s campaign and his defeat, while not a surprise, left me dejected.

With the coming of the new year, David Stockman, then a member of the House of Representatives, resigned to accept the position of Director of the Office of Budget Management in the Reagan Cabinet. And thus began what came to be known as Reaganomics.

No one who has been reading this column for any period of time will be surprised that my own political views are far different than those of David Stockman. Indeed, Stockman became, for his time, the leading proponent of supply side economics – a theory of economics that I believe has been thoroughly discredited.

When Reagan took office, America was in the midst of a severe recession, and new ways of addressing the problem were looked upon favorably. Supply side economics was the big new idea floating around in business circles. I was working in the Technical Department at Kroch’s & Brentano’s bookstore on South Wabash Avenue in the Loop at this time, where we sold business books and one of my duties was creating displays of the new books on tables throughout our section. As you probably surmised, most of these displays featured books about supply side economics, in particular, George Gilder’s Wealth and Poverty, which sold over a million copies and popularized supply side economics within the business community.

Stockman played a key role in the passing of the Gramm-Latta Budget, better known as the Reagan Budget. Stockman was riding high and was being lauded as a tough negotiator.

Everything changed for Stockman in December of 1981, however. Less than a year on the job Stockman granted extensive interviews to a writer William Greider from Atlantic Monthly magazine. The result was an article that totaled more than 18,000 words (think more than 18 times the length of this column), and in the course of the interviews Stockman made a cardinal mistake for a politician: he was honest.

In particular, Stockman responded to a series of questions about the budget making process with the now famous quote: “No one really knows what is going on with all these numbers.” The quote became the subtitle of a Rolling Stone article and the Reagan administration scrambled to minimize the article’s significance.

As I said earlier, I am no fan of Stockman’s political or economic views, but I have always admired the fact that he admitted something that all of us should realize: It is impossible to know what is going on in a budget the size of the federal government.

Let’s take just one small example to illustrate the difficulties inherent in dealing with a budget that is as massive and far-reaching as the federal government’s.

One of the proposals that had been floated is to make further cuts to the Home Energy Assistance Program (HEAP). This program helps to provide energy efficiency upgrades to low income homes (those households that earn no more than 150 percent of the federal poverty level). HEAP has two programs, one that helps to pay the heating costs for qualifying households (LIHEAP) and one that provides weatherization improvements to qualifying households (WAP).

HEAP’s funding has already dropped from a peak of $5.1 billion to $3.478 billion this year. So what would further reductions potentially mean?

The weatherization program employs builders at a local level (typically at the county level) to do things like install energy efficient windows in qualifying homes. Funding cuts may mean these workers would be consolidated with one group of workers covering several counties. In other words, skilled builders could lose their jobs.

If consolidation occurred then the likelihood is that fewer homes could be served, and this would mean fewer windows (as an example) would be installed. This, then, has an impact on the window manufacturers who would have to find a new market to make up for the lost business or – potentially – it may mean that the window manufacturer has to layoff employees.

Additionally, if there are fewer dollars available to provide energy assistance, either there will be less money allotted to qualifying households or there will be fewer households receiving funding. Currently, all of us paying energy costs are contributing approximately a dollar for energy assistance on each and every bill. This amount could increase. And fewer people being assisted or receiving less assistance may result in people losing their homes.

It is possible that there are other outcomes from a reduction that I haven’t even mentioned, but whether or not these potential outcomes occur remains to be seen. I am not arguing either for or against a reduction in HEAP funding. My point is that any time changes are made to the federal budget the economic ramifications can be significant and far-reaching.

While HEAP is a relatively small item within the federal budget, changes in its funding – as I have shown – can significantly alter our economy at both a local and a national level. And this is why David Stockman’s famous comment is so true. But I would take it one step further: It is impossible to know what is going on with all these numbers.