The Corner

Politics & Policy

The Education Of Mick Mulvaney

OMB director Mick Mulvaney speaks to reporters at the CFPB, November 2017. (Reuters photo: Joshua Roberts)

I am incredibly disappointed to see my hopes about budget director Mick Mulvaney go up in flames. See, I thought that as a budget director, he would be more like David Stockman than many of the successors we have have since he left his job after serving in the Reagan White House. In fact, when Mulvaney was named as the head of Office of Management and Budget, I wrote:

Yet there is some reason for optimism, as President-elect Donald Trump has just nominated a lawmaker who seems to want to pick up the work just where Stockman left it 30 years ago at the Office of Management and Budget. That guy is Rep. Mick Mulvaney, a South Carolina Republican and a founding member of the House Freedom Caucus.

Like Stockman, Mulvaney is an outspoken fiscal hawk who isn’t afraid to fight against the establishment and for spending cuts.

While Mulvaney claimed “I will always be a budget hawk,” this has become harder to believe. Ignoring the added $300 billion over two years agreed upon over the weekend by Republicans and Democrats, his new budget completely gives up on the pretense to balance the budget in ten years (in contrast to last year’s budget)  and it will run a deficit close to $1 trillion for each of the next three fiscal years.

I guess there wasn’t enough fairy dust to make this budget look better than last year’s magical budget. Indeed, the FY2019 deficit lines exist in spite of the unrealistic assumptions about high growth rates sustained over ten years, optimistic receipts, or dead on arrival savings. Incidentally, unrealistic assumptions aren’t not unique to this budget, this president, and this budget director. What’s disappointing about it is that Mulvaney seems to embrace the fiscal direction our country is heading toward.

The memory of him going to Congress to ask Freedom Caucus members not to behave as he used to when he himself was in Congress is forever seared in my mind.

And the truth is I am struggling to understand how he, of all people, proposed and defends the paternalist and dare I say, bigger than big government idea, to deliver nonperishable food directly to America’s poor instead of food stamps all neatly wrapped in the infamous “buy Americanprovision. Maybe a job in the White House brings out the Michelle Obama in some of us. One thing is sure: an outstanding amount of wishful thinking or ignorance about previous failures to put in place those exact types of command and control policies … Matt Mitchell and Robert Graboyes of Mercatus remind us of a few of them:

Michelle Obama’s school lunch directives aroused intense opposition from dissatisfied students coast-to-coast. But a much closer parallel is the federal government’s role in distributing food on Native American reservations.

Beginning with forced relocations in the mid-19th century, the federal government aimed to provide Native Americans living on reservations with adequate nutrition, but at low cost. The result was a diet heavy in canned foods, flour, sugar, and lard in place of traditional foods. Parallel programs persist even today, likely contributing to the obesity and diabetes epidemics ravaging these areas.

This program echoes the much maligned and nutritionally dubious “government cheese” distribution programs of earlier decades.

What I am most disappointed by is what looks like a total abdication of what made him such an unusual Republican representative. As I wrote:

Better yet, like Stockman, he isn’t afraid to go after the Republican sacred cow—defense spending. That point is significant in a party whose lawmakers tend to favor military budget increases and oppose reductions no matter how unrealistic the proposals are.

Mulvaney has also shown that he isn’t scared to work with Democrats when he has to. For instance, he has a history of teaming up with Rep. Chris Van Hollen, D-Md., to go after the beloved Republican practice of keeping war funding (money in the Overseas Contingency Operations account, or OCO) separate from the regular defense budget. As he has pointed out repeatedly, this is nothing more than a budget gimmick to avoid spending caps on military spending.

Having fewer budget constraints means there’s a readily available slush fund for Congress. As the nonpartisan nonprofit Taxpayers for Common Sense documented, “stuffing OCO full of the projects in Bahrain, Djibouti, Italy, Oman, Poland and Niger as a way to avoid those caps demonstrates a blatant disregard for fiscal responsibility and an unwillingness to make the hard choices necessary to prioritize investments.” No kidding

Oops. I was wrong, wrong, wrong. OCO are alive and well under Mulvaney’s watch. Taxpayers for Common Sense has this handy chart about the $69 billion OCO gimmicks:

As long as he was in the House of Representatives, Mulvaney was a sound voice in recognizing that not all increases in defense spending leads to higher security, that misallocation is an important problem in the defense budget, and that throwing more money at DoD could make things even worse (in part by preventing needed reforms). He was pretty loud about the abuse of the OCO budget line and its lack of transparency and accountability. He also defended the budget caps and understood how defense hawks were often willing to grow non-defense spending to break the defense budget caps.

I also saw Mulvaney as an ally in the fight against cronyism. Again, here is what I wrote a year and half ago:

Mulvaney has also proved to be a great ally in the fight against cronyism. In fact, he fought vigorously against the Export-Import Bank of the United States, an outfit that extends taxpayer-backed loans to mostly large or state-owned foreign companies to buy goods from large, politically well-connected American companies.

He deserves particular credit because the bank’s main beneficiary, Boeing, actually operates in his district. Stockman, too, was a fervent advocate of shutting down the Ex-Im Bank. He wrote: “Export subsidies are a mercantilist illusion. … I had long insisted, to any liberal who would listen, that the supply-side revolution would be different from the corrupted opportunism of the organized business groups; that it would go after weak claims like Boeing’s, not just weak clients such as food stamp recipients.” It seems to me that’s what Mulvaney has been trying to do.

As my colleague Tad DeHaven documents here, Ex-Im and many other swampy programs come away unscathed under this budget. He writes:

The budget proposal does almost nothing to “drain the swamp,” and in many ways will sustain or expand it. The inconsistencies are striking. Language that the administration uses to justify eliminating a few programs that dispense special-interest privilege could apply to the many programs that it has decided to keep around.

What happened? Putting my public choice hat on, I would say that lawmakers usually trample their principles once in office if they believe this is the way to please their constituents and get reelected.  My guess is that, now that he is in the White House, he wants to please the only constituent that matters: the president.

Whether that’s what happening or not, all I know is that there is no reason for deficits to be going up right now other than the refusal by Republicans in power to cut spending. They didn’t cut spending when they cut taxes, they didn’t cut spending when they agreed to jack up the defense budget, and they refuse to cut spending as the economy is growing. It’s not as if they are considering tackling entitlement spending (and there is always a good reason in their mind to jack up discretionary spending.)

Mulvaney is at least honest about the fact that the probability to deliver on the president’s campaign promise to get rid of the debt in eight years is zero and that the fault lays on the policies implemented in the last year. He said this during a budget hearing:

“I don’t think it’s possible to, at this point, given what has happened in the last 12 months, especially to pay off the debt in eight years,” Mulvaney replied.

There is always been a large number of fiscally careless members, defense hawks and lover of pork-barrel politicians in the Republican party. I was hoping that Mick Mulvaney could stop them from growing the size of government. Apparently, I was wrong.

Veronique de Rugy — Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University.

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