Tighter Belts, and Different Homes for Contracts

As we go to press, Republicans on the Hill are floating ideas about which agencies and programs we can live with or without as they create a seven-year plan to balance the nation's budget by 2002. No one will be brave enough to target hallowed entitlements; therefore, expect major crackdowns at places like. the Transportation Department, which will take a big hit; the Commerce Department is history. Expect programs that have some scientific merit and some potential for information technology, such as the Department of Interior's National Biological Survey, to die from natural selection, since it's unlikely industry will want to carry them through.

There's a lot of talk about government reinvention, but with the Republicans' suggested 15 percent reduction in overhead at agencies, a multiplier would suggest a 20 percent or more cutback in procurement of information technology components.

We don't expect that the Defense Department will be a target for cuts, but don't expect any growth. Everyone's seen the charts promising increased procurement spending through 1999. We would suggest taking them with a grain of salt.

More and more federal work will be carried out by the states and by local governments as money and authority flows out to them, and flows less to federal agencies. Whether this will result in federal agencies tightening their external spending in order to keep their internal staffs employed remains to be seen.

A significant number of federal agencies will almost certainly lose substantial manpower in the next couple of years, creating the prospect of more outsourcing. However, to put on the long-view field glasses for a moment, it would seem that the Democrats, if they try to restore some of the severed limbs once they return to power, will have to find new clothing for them. One of the best ways to do that is by mobilizing the financial interest of contractors. The Republicans, it should be remembered, are trying to slow the growth of total federal spending by a trillion dollars over the next seven years. To do this, total spending can still grow at 3 percent a year - though the Defense Department and Social Security are exempt from that trillion-dollar slowdown. That means the greatest impact will be on discretionary spending, which pays for things such as the Federal Aviation Administration, the National Institutes of Health, research and development, and the National Oceanographic and Atmospheric Administration.