Guest: Grace, J. Peter
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THE OPEN MIND
Host: Richard D. Heffner
Guest: Peter Grace
Title: “Waste Not, Want Not”
I’m Richard Heffner, your host on THE OPEN MIND. And if he hadn’t been the guest on my other weekly program, The Editor’s Desk, so that I did become familiar enough with his no-nonsense style, I probably would have been petrified when I watched J. Peter Grace on another program this morning showing what a pugnacious guy he is. But then I guess you have to be if you are the boss of W.R. Grace and Company and if you’ve been chairman of the presidential private sector survey on cost control, and if McMillan has just published “Burning Money”, a book about what the Grace Commission discovered about the way seemingly most of government wastes our tax dollars. Of course, I don’t know if it’s obligatory that in going after wastefulness in government one has to say that two-thirds of our senators and representatives are clowns, but that is what Mr. Grace said to me on the air not so long ago. And I suppose he sticks to that characterization. Sure, he puts his company’s money where his mouth is. And W.R. Grace is spending more than $3 million on an advertising campaign to keep the enormous federal deficit very much on our minds, despite the fact that in the recent presidential campaign, there was a tendency on his candidate’s part not to see the deficit as quite so destructive to our economy as some other partisan economists were saying. Indeed, about that advertising campaign, I want to ask Mr. Grace how much of what it costs will be wasted.
GRACE: Well, maybe the entire amount of the cost, if nobody looks at it. It’s impossible for me, since I’m not an expert in the media, to put a number on the waste in the media. Now, Mr. Heffner, since you’re a leading figure in the media, you are the one that would have to answer that question.
HEFFNER: Well, I’m not spending the money. And that’s why I ask you because I wanted it to lead to the question of whether the kind of wastefulness that may take place, slippage, isn’t part of the waste that you found in government slippage that is just totally necessary?
GRACE: I don’t think so. Because I think that the 2,000 people that we had down in Washington working for two years are accustomed to slippage. And I think they took that into account when they clarified and identified the amount of waste in the government. I don’t think they went down there like a lot of neophytes who aren’t accustomed to slippage themselves. In other words, if you’re a golf player and your handicap is eight, then we know that you’re normally eight over par. So we were judging things on the basis of about a 12 handicap golfer, which accounts for the slippage.
HEFFNER: What was the total number of items that you identified, that the Grace Commission identified as areas of waste?
GRACE: There were 2,478 specific suggestions that we made. “Do this, do that”, 2,478 times. “And if you do all those things, you’ll save $424.4 billion over three years.
HEFFNER: Now why hasn’t that been done yet?
GRACE: Well, in the first place, we didn’t come out with the report until January 16th. And you are, yourself, by your questions, showing that you are not, you might say, patient with slippage. Because I mean you seem to be implying by your question that it should have been done immediately. And I’m saying to you that in Washington and in the federal government, nothing gets done immediately. They talk, talk, talk, talk all the time and they do very little. But since the White House has already taken a hundred and three billion of our suggestions and approved them, I think that’s pretty good in an election year in ten months.
GRACE: But you seem to disagree by the thrust of your question.
HEFFNER: I wouldn’t dare disagree with you, Mr. Grace. I just want to illumine certain things. In the first place, the question that had occurred to me — it did when you and I appeared together on “From the Editor’s Desk” – the question that occurred to me was to ask you whether this was so much a matter of waste as it was a matter of a different philosophy of government that you were addressing yourself to.
GRACE: It is. It is exactly right. It is a different philosophy of government. And if you went up to Newburg, New York in the 20s where the gangsters were all gathered up there — you probably read in the various newspapers about the gangsters – they had a different philosophy too. And when they got back at someone, like, in maybe in your society and my society, a lifted eyebrow is as much as we do…When somebody’s name comes up…but they believed in rubouts. You see? So you’re absolutely right. Everybody has different ethics that they live by. And the government has an ethic that has to be changed. You‘re a hundred percent right in what you say.
HEFFNER: But you see, you’ve talked about waste, and I think for most of us outside the realm of the commission, outside of those who were impacted by your inquiry, we think of waste as something that is, something that can be stopped. You wrote, you talked, you discovered the, the, the uses of machinery, the costs of machinery. You take a hammer, you take a lamp, you take a light bulb, you take things that cost hundreds or thousands of dollars when they should have cost pennies, comparatively.
GRACE: Yeah. They’re buying things at outrageous prices.
HEFFNER: Okay. But then you go on – and I was so fascinated with your book “Burning Money” – you go on here…Let me just find the…
GRACE: Gee, can you look into the book that quickly? Amazing.
HEFFNER: I can, I can look into the book that quickly and find this…
GRACE: That’s fantastic.
HEFFNER: …this spot where you talk about “the nanny state”. And I began to wonder whether you weren’t talking more about your own discomfort about what we do for our citizens than about the kind of waste that leads to buying a hammer for a thousand dollars or fifteen hundred dollars.
GRACE: All waste is the same as far as I am concerned, and it ought to be eliminated since 90 percent of the taxable income comes from below $35,000. And if you went out like I did – I know you’re chairman of the censoring committee, voting committee in the movies – and you go to California. You commute between Los Angeles and New York, but if you were out on the highways and byways like I am and, each week, and see these hardworking people in factories, earning maybe 25 or 30,000 a year, and paying two or $3,000 in taxes – their Social Security taxes of seventeen hundred dollars – and you see they’re paying out 38, 39 hundred dollars a year, and then see how that money – and it’s 90 percent of the income, this taxable income, is below 35,000 – so the average American family has to pay for this. All we’re saying is, “You ought to know about this, folks, before you pay your taxes on April 15th, now they’re blowing your taxes”.
HEFFNER: Yeah, but, you know, that’s much more direct. If you had entitled this book “The Nanny State”, if you had made it an out-and –out so-labeled attack upon the welfare state, that would have been on thing. But…
GRACE: Well, we’re not against the welfare state. We’re only against wasteful welfare state.
HEFFNER: What’s this business about the nanny state then?
GRACE: Well, what does it say?
HEFFNER: What it says in effect is that let’s compare it with the welfare state mentality of those legions who see the government as the national nanny. And that’s something that you don’t like.
GRACE: Yeah. Right. It’s gone too far. I mean, you see, when President Kennedy I’m certain, although, Mr. Heffner, I didn’t know you in the 60s. I, I, it’s been my loss, because you’re such a brilliant and such a warm individual. But I’m sure you were for President John F. Kennedy. That was Camelot days. Now, in those days the social programs were $38 billion. And now they’re 413 billion. We’re just saying it’s too much. It ought to be around 300 billion. It’s about 113 billion too much. That’s, it’s been carried too far, that’s all.
HEFFNER: Okay. Okay.
GRACE: That’s all we say.
HEFFNER: But now, 113 billion too far, or how much too far, you still are talking not really about he kind of waste that most people talk about; you’re talking about his nanny state. Now, a moment ago you said…
GRACE: No, no, not at all. I’m sorry.
GRACE: For instance, take the food stamps, which that congressman…went after me on the program that you so kindly alluded to a minute ago. He objected to our saying that when the formula for the food stamps was established in the early 1970s was before the school lunch program. And therefore the school lunch programs, which is an added meal, you know, they have a hundred million meals a day, the government provides 93 million. That ought to be deducted from the formula in the food stamps because that’s an additional amount of calories or whatever you want to call it that are being fed to people who are on food stamps and the formula ought to be adjusted. Now that’s something that ought to be looked at. We’re not saying that any of this is wrong in principle. We’re saying it’s wrong the way it’s being doled out and what’s worse is that anybody who wasted money – for instance, that congressman last night, he’s a leader in the waste troops. He’s one of the generals in the waste army. What did he open the program up with without anybody having said a word about it was food stamps? It’s the same thing in California when Proposition 13 came out. What did they do? Started throwing firehouses. You know, we won’t be able to have any fire protection. California still has plenty of social services. Nothing went wrong. Everything went well and Proposition 13 was a success. But the freest thing they do is talk about food stamps, aids to families with dependent children. This was waste in all these programs. The general accounting office two weeks ago came out and stated – this is, they work for congress; they’re liberals – they came out and said there was over a billion dollars of fraud in the food stamp program. And that’s the general accounting office.
HEFFNER: Okay, then let me…
GRACE: And there it is.
HEFFNER: Let me ask you, because maybe I have misunderstood you…
GRACE: I think you have. And I think you’re so brilliant that I can’t believe that you can be saying some of the things you’re saying if you understood the facts, you see.
HEFFNER: You’re terrific. You’re absolutely terrific in this, in this line of blarney that your provide. Now look, I was brought up by a nanny. She took good care of me, but she believed in waste not, want not. So I don’t make the equation between the nanny state that you write about and the kind of waste that you have identified to a fare-thee-well here. I think there are two issues here, and I wonder if I’m really wrong. One issue seems to be, “For crying out loud, let’s use good business practices and get rid of the wastefulness…”
GRACE: I know you feel that way.
HEFFNER: Okay. And the other point seems to be, “Let’s forget this overwhelming welfare-stateism, this nanny stateism that has grown up in the years since John F. Kennedy. Is that fair to say that is the other part of the equation?
GRACE: It’s fair to state that they’ve overdone the welfare side of this thing, and that they keep getting themselves elected. You have people, congressmen, for instance, I – it’s a very complex issue, and it’s hard to describe, but let me give you an example. This is the point I’m trying to make and it’s complicated. There are 200,000 employees in the Veterans Administration. 200,000. That’s a big outfit. If Harry Walters, who is the veterans administrator, wants to make a change involving three or more employees out of 200,000 to file permission for that change by February 1st of each year, and they have in Congress until October 1st to approve it or disapprove it. Now that’s naked power abuse. It’s ridiculous. Two hundred thousand people and the administrative things are changing all the time. Want to move three people or change the organization, they have to ask congress and give them six months? That’s crazy. But the people who put in that naked power have the naked power by pretending that they’re helping this country in the long run by being the savior, by having 963 social programs. We don’t need 963 programs. We don’t need the fact that one person can get into 17 of these programs simultaneously. We don’t need the fact that in New York State, for instance, a person can get a, a hundred and fifty percent of the minimum wage out of t he social program, and then move in over the weekend in the underground economy and moonlight in bars and restaurants and get $200 in tips a week. We have nine, 600 restaurants. I know what these girls get in tips. They can make, we have one girl in New Orleans gets 130, $130 a day in our restaurant just in tips. Well you can imagine what these people can do every weekend in restaurants.
HEFFNER: Mr. Grace…
GRACE: We don’t need this.
HEFFNER: Mr. Grace, I don‘t have the wisdom, the knowledge, the brilliance to be able to combat…
GRACE: You’re much smarter than I am.
HEFFNER: …the…That’s what we could do all during the program, kid each other that way.
GRACE: Yeah. Yeah. But I mean it…
HEFFNER: But I want to ask you…Well now wait a minute…
GRACE: …you’re much smarter than I am.
HEFFNER: I want to ask you why you’re not willing to disassociate these two things – because you start off, and it is a brilliant, brilliant, brilliant thing to do – you start off talking about the man who can’t fire or remove a couple of employees, what it takes, and suddenly you are off on waitresses who make $130…
GRACE: Yeah. But not…One leads to the other. First these people get this naked power to put in that kind of a rule on Harry Walters who is the administrator of 200,000 employees. “Don’t change the jobs of three or more without our permission; and give us six months to approve it”. How do people get that kind of power but by being Santa Claus and handing money out to people and getting themselves elected…
HEFFNER: But then…
GRACE: That’s how they get that power. It’s ridiculous. It never should have been allowed to tell…Harry Walters should have said, “I will not request your permission to change three people out of 200,000, and I will not do it.”
GRACE: And they should not have had the power. He didn’t dare say that because they had this naked power. And how they get it is by going to the people every two years, the House of Representatives, and saying, “If it wasn’t for us, you’d be starving to death”.
HEFFNER: You know, all kidding aside. No joking.
HEFFNER: I really find what you have written and what you are saying totally intriguing, because I think you had your finger on something terribly important in our society. But why mix it with questions that have to do with that security net that Ronald Reagan wants this country to have? Why mix up the poor administration, the lack of wisdom in the running of government, the wastefulness, with the question of social welfare programs? And that’s what you’re doing.
GRACE: You want the answer to that question?
GRACE: Very simple answer.
HEFFNER: One leads to the other.
GRACE: Let me ask you a question. What percent of GNP are taxes able to take out of this country’s GNP without there being a major problem such as a hundred billion dollars a year in the underground economy now? And I tell you somewhere between 18 and19 percent. When you get into that range, you’re taking, you know, the middle American family is paying 246 times the taxes they were in the late 40s. And they’re paying a hundred times as much Social Security tax together. So therefore, are we right beating up against the top here as to how much money we can raise? And I’m saying to you that you can’t raise 18 to 19 percent of the GNP in taxes and spend 14 and a half percent on social programs. It doesn’t even…There’s not enough left. It’s a mathematical situation. There ain’t enough left.
GRACE: That’s, the social programs have to go down to 11 percent of GNP, and leave about eight points for the whole rest of the government. It’s as simple as that. You can’t tax more than we’re getting at about 19 percent of GNP, and therefore you’ve got to drop this about two percentage points.
HEFFNER: What do you think the impact of that would be – if you had your way, now – what would be the impact upon food stamp programs and the various other welfare programs and Social Security and so on and so on?
GRACE: Well, you…
HEFFNER: What would be the impact upon what you call…
GRACE: Well, I mean, what would be the impact…
HEFFNER: …the nanny state…
GRACE: …if you knocked a billion dollars of fraud out of food stamps…
HEFFNER: No, no…
GRACE: …that the general accounting office…Some of these crooks would not get what they’re getting, what they don’t deserve to get. Absolutely no problem at all.
HEFFNER: Mr. Grace, we may not agree, but we sort of like each other.
GRACE: Oh, I love you.
HEFFNER: So, nobody’s watching us here. We’re here all alone.
HEFFNER: Honestly, I want to ask you very simply: Suppose you did knock out what people generally consider the waste, and you did get rid of the poor administration, and you did as your book suggests, let real computerization take over and…
HEFFNER: …do what has to be done.
GRACE: Really do it properly.
HEFFNER: Okay. Suppose you got rid of that kind of classical waste. What more would you have us do by way of diminishing the level at which this government makes life easier for those people who live on the lower rung of the window?
HEFFNER: That’s fine.
GRACE: Zero. Absolutely. We’ve got to avoid a $13 trillion debt in the 16 years from now, and an annual deficit of 1.966 trillion. We’ve got to avoid it. And we can avoid it. There would only be a deficit of 37 billion instead of a deficit of, annual deficit of 1.966 trillion. In the year 2000, 16 years from now, if you do our program you got a deficit of 37 billion. If you don’t do it you get a deficit of one point…Simple as that, and that’s…
HEFFNER: Yeah, but when you say, “If you do our program”, and then…
GRACE: Two9 thousand four seventy-eight suggestions.
HEFFNER: yeah, but among those suggestions, clearly , is the suggestion that we move away fro m what you call here…
GRACE: I’m one of the men who would do…
HEFFNER: …your welfare state mentality.
GRACE: You’re looking at the book and I’m talking about the 2,478 suggestions that are in the other book, “War on Waste”.
HEFFNER: Yeah, but…
GRACE: This is just a readable book to let people see what’s happening to them. But it’s not a factual – In other words, this is not the factual report of the commission. This is just a nice, philosophical book to let people know what’s happening in Washington.
HEFFNER: Okay. I want the chairman of the commission here; I’ve got him. I also want J. Peter Grace who wrote this book, who is a philosopher, who has his point of view about the welfare state, the nanny state, and that’s what I’m trying to get out of you. Forget the business for the moment about the report. It’s J. Peter Grace. I’m trying to get what he thinks about the welfare state. Mario Cuomo…
GRACE: I think it ought to be 11 percent of GNP instead of 13.6. It’s gone too far.
HEFFNER: No matter what happens to the people who would have to have their welfare diminished to some extent?
GRACE: You have to…
HEFFNER: Excuse me. If you say yes…
GRACE: I say yes.
HEFFNER: …I can accept that, but I want you to say it.
GRACE: I want to say to you that this stuff feeds on itself. The more you give people things the more they become dependent on it. The more you create new generations of people who become the wards of the state. It’s not the way this country ought to go. It can’t afford to go that way, and it’s not good for the people.
HEFFNER: Mr. Grace, when Mario Cuomo, the governor of New York, was inaugurated, he used a phrase, and you reminded us of social Darwinism, and said he would not accept the philosophy of social Darwinism when he made his speech at the Democratic convention in 1984…
GRACE: No one is talking about social Darwinism. He’s out of his mind, that man. He has no judgment at all. He’s another guy who is working the gravy train and he’s going to fall flat on his something before 1988. This man is nothing more than another gravy train guy. We’ve go a big surplus in the state; will he lower taxes? Not yet.
HEFFNER: But didn’t…
GRACE: The man is wrong, wrong, wrong. Once they get in there and get that power, then they’re buying the people that way. No one has advocated social Darwinism. I will say one thing about that man: He’s good at selecting words. He sits up there, he can fight with Archbishop O’Connor despite the fact he’s a Catholic. “Matilda and I wouldn’t have an abortion, but we’re gonna fund abortions and that’s okay”. He’s a great debater, but he’s wrong, wrong, wrong. Name one person on the other side who has advocated social Darwinism. That’s absolute…
HEFFNER: Now, that’s what I was going to ask you. I wasn’t going to ask you to defend Governor Cuomo as you just have.
GRACE: I did. I defend him as a man who’s a decent fellow who almost got on the Pittsburgh Pirates, but as a politician he’s another one of these vultures who’s going to drive us all into national bankruptcy.
HEFFNER: Do you feel that way about anyone who would comment upon social Darwinism and the inadequacy of that philosophy?
GRACE: I’m completely against social Darwinism. I only say run these programs, have enough programs to give people an incentive to get out of the programs and become self-supporting and become the way you have to be in this world to have any self-respect and then do what you have to do to help people who can’t. But try to make it a disappearing situation so we bring people out of this form of society.
HEFFNER: What about those at the lower end, the bottom rungs of the ladder?
GRACE: And will they be there for how long? Give me an example.
HEFFNER: Well, I don’t know what to say about that, but won’t there always be…
GRACE: Are they people who are irretrievable?
HEFFNER: Well, do you think there are people who are irretrievable?
GRACE: Well, what percent did we spend on them through 1960, and were we completely wrong in those days?
HEFFNER: Well, now, let me ask you whether you think that there are people who are irretrievably at the bottom of the…
GRACE: Yes. And take care of them. And take care of them properly. And I’ll be on the leading edge of that. Take Father Readow (?) over here, what he’s doing in Covenant House. I’ve worked with him. I’ve worked with many, many charities. I’ve been head of CYO, Catholic Youth Organization in New York for 40 years. I’m…we’ve got to help those people, and help them good. But we’ve got to really help them to become self-supporting and have some self-respect. But not just giving them handouts and then saying that they are the heroes in this country because they’re getting all these handouts.
HEFFNER: Do you think we can afford to do that?
GRACE: Afford to do what?
HEFFNER: To take care of those people at the bottom rung of the ladder.
GRACE: Absolutely. If we do it efficiently we can bring it down to 11 percent of GNP. That’s what I’m saying. Eleven percent. It was Camelot; Jack Kennedy only spent 5.6 percent. I’m doubling up on Jack. See? And I’m saying twice Camelot. Twice Camelot.
HEFFNER: Do you, were you as much a devotee of Jack Kennedy in the 1960s as you seem to be?
GRACE: Well, I worked with Jack Kennedy. I was head of his Alliance for Progress programs for business in Latin America. I had an office in the Commerce Department. I worked for him. He was a super guy. I used to take his sister out for two years, Kathleen. I’m a devotee of the Kennedys.
HEFFNER: Would, do you think that the welfare state that we have today would have developed to this extent had John Kennedy lived?
GRACE: No. He, he knew when to stop. Jack Kennedy had very good judgment.
HEFFNER: Where, where, where would you stop? Where would you have stopped?
GRACE: Eleven percent of GNP.
HEFFNER: Yes, but those are numbers…
HEFFNER: …I’m talking about in what we do for people.
GRACE: What you do for…
HEFFNER: What have we done that has been that…
GRACE: Well, a billion dollars wouldn’t be in the food stamp program. And I’ll show you a trend line some day that we’re having…
HEFFNER: Can I ask you a question?
HEFFNER: You said a billion dollars wouldn’t be in…
GRACE: In the fraud. I wouldn’t be in there. We’d get that fraud out of there.
HEFFNER: Well, now, wait a minute. Would that be enough to get out of there, the fraud?
GRACE: Yes. Just get the fraud out.
HEFFNER: And that generally is your conclusion? Get the fraud out?
GRACE: That’s all I want. That’s all I want. I, I’m really a lib. My family have been Democrats. My grandfather was Mayor of New York on the Democratic ticket. I was one of 480 boys in boarding school. Three boys for Smith, 477 for Hoover. So I’m really a lib. I voted for Roosevelt. I was for Truman. I mean, just been carried too far. That’s all we say. It’s been mismanaged and carried too far. That’s all I say.
HEFFNER: And with…
GRACE: And we’re going to have a $13 trillion debt if we don’t stop it. And we have nine children and 12 grandchildren. Therefore, we’re worried about it.
HEFFNER: Now, what is going to happen in your estimation? We’re taping this how shortly after – we’ll admit to those, those few who are watching, your family and mine – we’re taping this shortly after the election. What do you anticipate will happen in terms of the economic program of the president? How far down will our deficit go now?
GRACE: I think that we’re going to get at least 60 to 100 billion out of this expenditure stream if we’re lucky in the first eight months of next year. By a campaign that Jack Anderson is leading. He’s a liberal columnist with 983 newspapers. He reaches 50 million…
HEFFNER: Where will the money come from? From what parts…
GRACE: It’ll come out of the 2,478 suggestions and out of fraud.
HEFFNER: Out of the fraud?
GRACE: Out of our suggestions. It will come out of fraud and mismanagement. It will come out of allowing Harold Walters to change three jobs out of 200,000 and make the Veterans Administration more efficient. It will come out of the VA not constructing nursing homes for four times the per-bed cost of the private sector. It will come out of not towing rich yacht owners off Hyannis Port or the Pacific coast where you go every two weeks for your movie censorship job, for free, when there is no life endangered at all, when there are commercial towing companies to tow these people in. Don’t tow in rich yacht owners for free in the Coast Guard. Don’t build nursing homes beds four times. Don’t let normal people go in and cut a quarter of a billion dollars of timber off the national forestry reserve for free. Don’t let them. Charge them if they can file it off the national debt. Don’t run the national pasturelands so you only recover 38 percent of our cost. You charge proper revenues for rich ranch owners. For all of these things that all have to be put together to make the government efficient. Buy some modern computers. Find out. Do you know how many social programs there are? There are 963. How many recipients are there?
HEFFNER: Mr. Grace, I’m going to get you to come back here…
HEFFNER: …and well go back over those figures and see if what you say is going to happen will happen.
HEFFNER: Thank you so much for joining me today.
GRACE: It was fun.
HEFFNER: And thanks, too, to you in the audience. I did have fun too. I hope you’ll enjoy it…join us again next time. Meanwhile, as an old friend used to say, “Good night, and good luck”.