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The Case for, and Against, Gridlock
What if the free-spending GOP loses the House?


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Phil Kerpen

Does the House GOP majority — after delivering a record number of pork-barrel earmarks, an enormous new entitlement program, and most recently a giant minimum-wage increase — deserve to become a minority this November? This question, once unthinkable among fiscal conservatives, is now a common topic of conversation in gatherings of limited-government analysts and activists in Washington.

 

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In his excellent new book, Buck Wild, which details how the House GOP degenerated from the Contract With America to its present state, Stephen Slivinski of the Cato Institute concludes a chapter with this provocative question: “Even if you don’t agree that a divided government would make us better off, can you really argue — based on the evidence here — that it would make us worse off?”  I’m not so sure.

 

Slivinski’s data show that the growth of government is far more rapid under periods of united control, with one party running the House, Senate, and White House, than when the House is controlled by the party not in the White House. Real per capita federal spending, which is adjusted for inflation and population growth, has increased at a 3.1 percent annual rate under Bush, faster than every president since Lyndon Johnson. This spending spree fits a larger historical trend with respect to divided government: Surveying more than forty years of data, Slivinski found that per capita government spending grows at an average inflation-adjusted rate of 3.4 percent under united government, versus only 1.5 percent under divided government.

 

There is reason to doubt that divided government, specifically in the next Congress, will limit spending. Bush, simply, has shown no appetite for cutting spending, and his cooperation with Democrats on landmark legislation like the No Child Left Behind Act suggests partisanship may not be the reason. When Bush did have a Democratic Senate to contend with, spending grew considerably faster at 4.3 percent annually than his overall 3.1 percent average. While Bush’s spending priorities would be largely at odds with a Democratic House, it’s possible that a Democratic House takeover would be a quid pro quo in which everyone’s pet projects grow.

 

The bigger question is the future of spending on entitlements, where the impending demographic shift in Congress will create skyrocketing federal spending absent reform. This potentially turns the rationale for divided government on its head: Gridlock is good when it prevents Congress from creating and expanding programs, but gridlock could be disastrous when doing nothing equates to leaving intact massive spending obligations.

 

Slivinski notes that federal spending went from 20.7 percent of GDP when the Republicans took over Congress to 18.4 percent of GDP when Clinton left office, but that it climbed back to 20.8 percent of GDP in 2006. That’s a big increase, and an embarrassing reversal. But it is dwarfed by the coming demographics-driven explosion in entitlement spending. The Congressional Budget Office projected last year that without reform, spending will be between 38 and 55 percent of GDP by 2050.

 

During Bush’s most recent State of the Union Address, Democrats congratulated themselves for blocking entitlement reform. Today, many of the same Democrats are campaigning on a platform of blocking any reform, and controlling the House would give them the absolute ability to do so. But united Republican control hasn’t yet delivered reform, while it did give us a gigantic new entitlement — the prescription drug benefit.  If Democrats controlled one of the levers of power, would it make them less reactionary and more open to meaningful reform?

 

Spending is only half the equation for fiscal conservatives, and the GOP is light years better on taxes than spending. The 2003 tax bill was a stunning supply-side success, restoring investor confidence and fueling a dramatic economic expansion. The expansion has, ironically, filled federal coffers and enabled the spending binge, but it also has created millions of jobs and trillions of dollars of shareholder wealth. Because major tax hikes are scheduled to occur automatically on January 1, 2011 — increasing the capital-gains tax rate by 33 percent, the dividend rate by 133 percent, and the top marginal income-tax rate by 13 percent — a prolonged period of gridlock, lasting through the next two Congresses, could cause real economic damage on the tax side. 

It’s clear from the fact that this discussion is even occurring that the Republican majority has a dismal record on limiting spending. The party has lost its fiscal compass. If the Republicans do lose the House this cycle, it will be hard to argue, based on spending policy, that they deserved otherwise. The ideal scenario for fiscal conservatives would probably be a brief period in the wilderness, a single cycle in which the GOP could regroup and refocus on the core fiscal issues that powered the Reagan revolution, led by a presidential candidate with a genuine commitment to spending restraint. But there are no guarantees in politics, and the Democrats could instead hold onto control, starting an era of even bigger government.

 

It’s quite a quandary. Almost makes me glad to be a disfranchised D.C. voter.

 

– Mr. Kerpen is a policy analyst in Washington. His website is PhilKerpen.com.


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