Bush the Budget Buster

The Bush administration recently released its mid-session review of the federal budget for fiscal 2006. The new data reveal that in spite of repeated promises of fiscal responsibility by the Bush administration and congressional Republicans, things are bad and getting worse. After five years of Republican reign, it's time for small-government conservatives to acknowledge that the GOP has forfeited its credibility when it comes to spending restraint.

"After 11 years of Republican majority we've pared [the budget] down pretty good," Rep. Tom DeLay (R-Texas) crowed a few weeks back during ongoing budget deliberations. But nothing could be farther from the truth, at least since the GOP gained the White House in 2001. During his five years at the helm of the nation's budget, the president has expanded a wide array of "compassionate" welfare-state, defense, and nondefense programs. When it comes to spending, Bush is no Reagan. Alas, he is also no Clinton and not even Nixon. The recent president he most resembles is in fact fellow Texan and legendary spendthrift Lyndon Baines Johnson--except that Bush is in many ways even more profligate with the public till.

The federal pie has two parts, each accounting for about 50 percent of outlays. "Mandatory spending" includes entitlement programs such as Medicare and student loans that are provided by law rather than by annual appropriations. Then there is discretionary spending, comprising most defense spending, homeland security, and programs such as farm subsidies and education. Discretionary spending is what the president and Congress decide to spend each year through appropriations bills. Because discretionary spending can theoretically be zeroed out each year, it is generally regarded as the clearest indicator of whether a president and Congress are serious about reducing government spending. Some major entitlement programs--most notably Social Security--are "off-budget," meaning they are not accounted for in either the mandatory or discretionary figures.

Table 1 compares the percentage change in inflation-adjusted discretionary, defense and nondefense spending over the first five budgets of Johnson, Nixon, Reagan, Clinton, and Bush 43 (the figures for the latter incorporate the recent mid-session review estimates). Table 1 makes it clear that Bush has been a big spender across the board.

Total real discretionary outlays will increase about 35.8 percent under Bush (FY2001-06) while they increased by 25.2 percent under LBJ (FY1964-69) and 11.9 percent under Reagan (FY1981-86). By contrast, they decreased by 16.5 under Nixon (FY1969-74) and by 8.2 percent under Clinton (FY1993-98). Comparing Bush to his predecessors is instructive. Bush and Reagan both substantially increased defense spending (by 44.5 and 34.8 percent respectively). However, Reagan cut real nondefense discretionary outlays by 11.1 percent while Bush increased them by 27.9 percent. Clinton and Nixon both raised nondefense spending (by 1.9 percent and 23.1 respectively), but they both cut defense spending substantially (by 16.8 and 32.2 percent).

Bush and LBJ alone massively increased defense and nondefense spending. Perhaps not coincidentally, Bush and LBJ also shared control of the federal purse with congressional majorities from their own political parties. Which only makes Bush's performance more troubling. Like a lax parent who can't or won't discipline his self-centered toddler, he has exercised virtually no control whatsoever over Congress. In the wake of massive new funding for the Gulf Coast in the wake of Hurricane Katrina, Bush did timidly suggest that some of the new money be matched by reductions in pork projects embedded in the just-passed transportation bill. The Republican response to such efforts is summed up by Alaska Rep. Don Young's reply to critics of a $223 million "bridge to nowhere" in Ketchikan. Proponents of budgetary "offsets" can "kiss my ear," Young told the Fairbanks Daily News-Miner, adding that paying for Katrina-related measures by trimming transportation pork is "the dumbest thing I've ever heard."

Figure 1 shows the cumulative real discretionary nondefense spending increases during the first five years of the recent presidents who managed to stay in office for more than one term. Each president's first year in office is set at a base of 100, so any dollar added or subtracted on his watch is clearly reflected. It's no surprise that Reagan, who cut nondefense spending significantly, emerges as the only recent president to have sharply curtailed government outlays during his tenure. Clinton's performance may be a little more surprising: During his first five years, real nondefense spending increased by less than 2 percent. Interestingly, nondefense spending declined during his first two years and only started its upward drift in his third fiscal year--when the Republicans took over Congress.

When confronted by its spendthrift ways, the Bush administration argues that much of the increase in nondefense spending stems from higher homeland security spending. It's true that most homeland security spending is tallied under nondefense discretionary spending. Yet when homeland security spending is separated out, the increase in discretionary spending is still huge: 36 percent on Bush's watch.

So only a part of recent increases are related to 9/11. And that's leaving aside the real question of whether even homeland security money--which has gone to pay for items such as Kevlar vests for police dogs in Columbus, Ohio--is being spent wisely. A substantial portion of Bush's increase in discretionary spending stems from new domestic spending initiatives. For a ready example, look no further than the Department of Education, one of three departments targeted for elimination by Republicans in 1994, when Tom DeLay and his budget-cutting friends first took control of Congress. In the last five years, Education's budget has grown by a stunning 79.9 percent.

If the performance of the president and Republican Congress is disheartening when it comes to discretionary spending, things look a little better when it comes to mandatory spending. Better that is, than LBJ and Nixon. Table 2 compares the percentage change in real total and mandatory spending over the first five budgets of recent presidents.

Total real outlays have increased by 23.4 percent under Bush, placing him second only to LBJ. As the architect of the Great Society, Johnson created vast new entitlements such as Medicare and Medicaid, which continue to balloon the mandatory portion of the federal budget. Mandatory spending reached its zenith under Nixon, partly because entitlement spending tends to balloon during recessions, as poverty rates and unemployment increase.

Because it is linked to the larger economy and reflects decisions often made before a particular president takes office, spending analysts tend to slight entitlement spending. Yet the president can still have a dramatic impact on entitlement spending. There's the LBJ example, where a sitting president creates new entitlements that drive up government spending. But there are other ways that a president can affect entitlement spending.

For instance, by cutting marginal income tax rates, an administration can substantially reduce the number of people unemployed and hence reduce entitlement payments. Also, the president can change the underlying laws that define how and to whom the money is distributed. President Reagan's first budget plan promised to "overhaul the nation's overgrown $350 billion entitlements system"; he also proposed numerous spending reductions to Medicare and Medicaid and was able to make some modest reforms to slow program growth rates. Those are some of the reasons why the total increase in mandatory spending during Reagan's first five years was a relatively paltry 12.4 percent. In 1996, President Clinton signed off on vigorous welfare reforms. Chief among them were the strong incentives for welfare recipient to get jobs, which benefited all Americans in the form of lower spending on welfare. The economic boom of the Clinton years--induced in part by large capital gains tax cuts--also worked to decrease entitlement spending.

President Bush seems intent on following the LBJ model by making entitlement spending even more overgrown. In a fiscally reckless act, Congress and President Bush enacted the $550 billion (over 10 years) drug bill even though the budget is deep into deficit and Medicare already has a huge financing shortfall. Not only is the new drug program the biggest expansion in Medicare since its inception, it's virtually certain that the $550 billion price tag is a low-ball estimate. Despite the massive cost, some on Capitol Hill now want to expand these entitlements in the name of Katrina victims.

To date, the Bush administration has a disjointed, two-track budget policy. It has favored letting Americans keep more of their money via tax cuts while steadily building up the welfare state via unrestrained spending. Over time, that that strategy can't work. As Milton Friedman and others have long argued, the size of government is found in its total spending and, ultimately, spending is a taxpayer issue. Higher spending and resulting deficits create a constant threat of higher taxes. It's no surprise that not just Democrats but even moderate Republicans are now arguing that Bush's recent tax cuts be allowed to expire.

To be sure, Congress shares the blame for runaway spending in the past five years. Yet Bush has not vetoed a single spending bill during his tenure in office. To the contrary, he has signed every bill crossing his desk, including huge education, farm subsidy, and transportation bills. He has made only the most feeble efforts to rein in pork-barrel spending or offset new programs with cuts in existing ones.

What makes this all the more frustrating is that Bush, unlike Reagan and Clinton, faces a Congress that is controlled by his own party, which claims to be dedicated to smaller, more efficient government. Yet Bush has shown no leadership on spending reform--and Republicans have rebuffed even the mildest criticisms of their spendthrift ways. It seems incontestable that we should conclude that the country's purse is worse off when Republicans are in power.

Veronique de Rugy is a research fellow at AEI. Nick Gillespie is the editor-in-chief of Reason.

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