Is there much to celebrate in George W. Bush’s proposed 2004 budget? To be sure, the president is proposing meaningful tax reform that will make America more competitive and move us closer to a simple and fair flat tax. Yet before we rush to give the administration an “A,” let’s open up the budget and take a look at some of the gory details.
Sadly, a cursory inspection reveals that the president is engaged in an overspending frenzy that continues to reward programs that should be abolished. The White House argues that “we need spending discipline” but turns right around and boosts domestic spending by “only” 4% next year. Of course, this assumes that Congress will resist the bipartisan temptation to spend our money on pork-barrel projects. And it also assumes that the president will veto a bill that spends too much money — something he has not done since taking office.
Government spending is President Bush’s Achilles’ heel. In his first two years in office, he signed a bloated education bill and a subsidy-laden farm bill. Also, numbers show that in the first three years this administration will have increased government spending by 13.5%, making this administration more profligate than the Clinton administration.
The president’s defenders argue that everything must take a back seat to the war on terror, implying that increased spending is mainly the result of defense outlays. Yet the data show that spending has increased in all areas.
According to Chris Edwards at the Cato Institute, over the first three years of Bush budgeting, non-defense discretionary outlays will rise 18% — a number that far exceeds the spending increases during the first three years of the last six administrations. And it pales in comparison to the Ronald Reagan budgets. President Reagan restored America’s military during his two terms, boosting defense outlays by 19.2% in the first term and 10.4% in the second. But Reagan also reduced non-defense outlays, cutting domestic spending by 13.5% in the first term and 3.2% in the second. That is real budget discipline.
President Bush is also spending more than Bill Clinton. Clinton actually reduced non-defense outlays in his first term, albeit by only 0.7%. And, for all his flaws, he still signed market-oriented reforms such as NAFTA, farm deregulation, telecommunications deregulation, and financial-services deregulation.
The overall numbers show spending is growing too fast. But the details of the president’s budget are even more discouraging. Only the Justice and the Labor Departments — 2 of 21 major department agencies — will see their budgets reduced. Taxpayers also are being burdened with new programs, including the $15 billion Emergency Plan for AIDS Relief and $450 million to bring mentors to disadvantaged students and to the children of prisoners. Are these really legitimate functions of the federal government? What happened to the Constitution?
And let’s not forget corporate welfare. Bush’s proposal to give $1.7 billion over the next 5 years — more than $50 per American — to the automobile industry through the Freedom Fuel and FreedomCAR programs for hydrogen-fuel-cell research and development illustrates this spending frenzy. Those programs are extensions of the $1.5 billion failed Partnership for the New Generation of Vehicles program, under the Clinton administration. After eight years of subsidies, it is time to say no.
To be fair, President Bush probably would prefer less spending, but he does not want to be attacked for being “mean-spirited.” But special-interest lobbyists see this as a sign of weakness and act accordingly. After all, Washington is the only place in the world where spending increases are classified as spending cuts merely because the increase was smaller than the big spenders wanted.
We also know that President Bush is committed to reforming Social Security. But Social Security reform was nowhere to be found in this budget. Maybe the administration is waiting for the second term to move forward with the much-needed private accounts. At this rate, though, there might not be a second term. So would it not be wiser to expend some political capital promoting Social Security reforms that would give the economy a tremendous boost?
At the end of the day, over-spending matters because big government hurts our economy’s performance. Fiscal responsibility means more than just lower taxes. It also means having the courage to say no to wasteful spending — even if that means Ted Kennedy will get upset.
President Bush’s tax agenda is great news for the American people. His stated commitment to Social Security reform would be good for workers and retirees. But so far it is only talk and no action. To maximize the economic benefits of these policies, the president needs to put big government on a diet.
— Veronique de Rugy is a fiscal policy analyst at the Cato Institute.