In a recent article in the Financial Times, Clive Crook wrote about the fiscal consequences of the Bush administration. According to Crook, “With ill-designed tax cuts and reeling indiscipline on spending (partly, but not only, because of the war) the Bush Administration turned this [surplus] into a deficit.” He wrote about the “fiscal incontinence of the Bush administration” and that “Mr. Bush has done the cause of fiscal moderation grave harm.” He added this:
The issue is not so much that he moved the structural budget balance from surplus to deficit … but that he spared the country until further notice the effort of examining its priorities and mending its failing fiscal machinery.
Mr. Crook, often an intelligent writer, is shallow and uninformed in this analysis.
The chief reason the nation went from a surplus to a deficit — and a reason that goes wholly unmentioned by Crook — was that President Bush inherited an economy skidding toward recession (it officially began just a few months after he took office). The dot.com bubble burst — and with it, so did the projected surpluses. In addition, the attacks on September 11th dealt a crippling blow to several important sectors in the economy; we lost a million jobs in around 90 days.
President Bush’s tax cuts — in the short term at least — did contribute to a larger deficit. But on the other side of the ledger, tax cuts were precisely what were needed to jump-start a sluggish economy. They were well-conceived, well-timed, and led to a growing economy, the creation of more than eight million new jobs, and a dramatic, even unprecedented, increase in revenues. This helped cut the deficit to 1.2 percent of the GDP in FY07. (The FY08 deficit, which is projected to be 2.9 percent of the GDP, is the result of slower growth in the economy and the stimulus package recently passed by Congress and signed into law by the president.) That deficit will still be below or equal to deficits during the 1980s and 1990s — and by way of comparison, the deficit under President Reagan reached 6.0 percent of the GDP and 4.7 percent under President George H. W. Bush.
If President Bush’s tax cuts had not been enacted into law, the economy during the last seven years would have been weaker, growth would have been slower, and therefore the deficit may well have been larger.
On spending, the Bush administration consistently reduced the growth rate of non-security domestic spending every year. The growth rate in 2001 (the last Clinton budget) was 16.6 percent; it dropped to 6.2 percent in 2002, and then, in consecutive years, 5.5 percent, 4.3 percent, 2.2 percent, and below inflation thereafter (it was the first time a president has proposed a cut in such spending since the Reagan years). Today total spending as a percentage of the GDP is below the average over the last four decades.
In addition, George W. Bush put more of his political capital on the line to reform and rein in spending on a major entitlement program (Social Security) than any other president. Bill Clinton, for example, actively worked against efforts to reform entitlements (for example, he helped derail the Medicare Commission’s effort to reform that program). Bush has proposed slowing the growth in Medicare from 7.2 percent to 5 percent (Congress failed to act). And Bush’s Medicare prescription-drug-benefit program, which was pricey, has at least added unprecedented competition to Medicare (thereby lowering the projected costs over ten years by an estimated 40 percent).
It’s true enough that George W. Bush was not, and never ran as, a “small government conservative.” On fiscal matters, though, President Bush understood that what is needed is a dynamic, growing economy, and the restructuring of entitlement programs. As on so many other matters, as time passes the president’s record will be seen in a much more favorable light, even as Crook-like critiques are empirically discredited and long forgotten.
— Peter Wehner, former deputy assistant to the president, is a senior fellow at the Ethics and Public Policy Center.