Tag: big government

Bush Was a Statist, Not a Conservative

A former White House speechwriter, Mark Thiessen, has jumped to the defense of his former boss, writing for the Washington Post that George W. Bush “established a conservative record without parallel.” Even by the loose standards of Washington, that is a jaw-dropping assertion. I’ve been explaining for years that Bush was a big-government advocate, even writing a column back in 2007 for the Washington Examiner pointing out that Clinton had a much better economic record from a free-market perspective. I also groused to the Wall Street Journal the following year about Bush’s dismal performance.

“Bush doesn’t have a conservative legacy” on the economy, said Dan Mitchell, a senior fellow at the libertarian Cato Institute. “Tax-rate reductions are the only positive achievement, and those are temporary … Everything else that has happened has been permanent, and a step toward more statism.” He cited big increases in the federal budget, along with continuing subsidies in agriculture and transportation, new Medicare drug benefits, and increased federal intervention in education and housing.

Let’s review the economic claims in Mr. Thiessen’s column. He writes:

The thrust of their argument is that Bush expanded the size of government dramatically – and they are absolutely right. Federal spending grew significantly on Bush’s watch, and this is without question a black mark on his record. (Federal spending also grew dramatically under Ronald Reagan, though he was dealt a Democratic Congress, whereas Bush had six years of Republican leadership on Capitol Hill.)

Since federal spending almost doubled in Bush’s eight years, it’s tempting to summarily dismiss this assertion, but let’s cite a few additional facts just in case someone is under the illusion that Bush was on the side of taxpayers. And let’s specifically compare Bush to Reagan since Mr. Thiessen seems to think they belong in the same ball park. This article by Veronique de Rugy is probably a good place to begin since it compares all Presidents and shows that Bush was a big spender compared to Reagan…and to Clinton. Chris Edwards has similar data, capturing all eight years of Bush’s tenure. But the most damning evidence comes from the OMB’s Historical Tables, which show that Reagan reduced both entitlements and domestic discretionary spending as a share of GDP during his two terms.  Bush (and I hope nobody is surprised) increased the burden of spending in both of these categories.That’s the spending side of the ledger. Let’s now turn to tax policy, where Thiessen writes:

Bush enacted the largest tax cuts in history – and unlike my personal hero, Ronald Reagan, he never signed a major tax increase into law.

Using the most relevant measures, such as changes in marginal tax rates or comparing the impact of each President’s tax changes on revenues as a share of GDP, Bush’s tax cuts are far less significant than the Reagan tax cuts. But there presumably is some measure, perhaps nominal revenues over some period of years, showing the Bush tax cuts are larger, so we’ll let that claim slide. The more relevant issue to address is the legacy of each President. Reagan did sign several tax increases after his 1981 Economic Recovery Tax Act, but the cumulative effect of those unfortunate compromises was relatively modest compared to the positive changes in his first year. When he left office, he bequeathed to the nation a tax code with meaningful and permanent tax rate reductions. The Bush tax cuts, by contrast, expire at the end of this year, and virtually all of the pro-growth provisions will disappear. This doesn’t mean Bush’s record on taxes was bad, but it certainly does not compare to the Gipper’s. But what about other issue, such as trade? Thiessen writes:

Bush enacted free-trade agreements with 17 nations, more than any president in history.

Those are some positive steps, to be sure, but they are offset by the protectionist moves on steel and lumber. I’m not a trade expert, so I don’t know if Bush was a net negative or a net positive, but at best it’s a muddled picture and Thiessen certainly did not present the full story. And speaking of sins of omission, his section on health care notes:

Bush created Health Savings Accounts – the most important free-market health-care reform in a generation. And he courageously stood up to Congressional Democrats when they sought to use the State Children’s Health Insurance Program (SCHIP) to nationalize health care – and defeated their efforts.

Conveniently missing from this analysis, though, is any mention of the utterly irresponsible prescription drug entitlement. There is no doubt that Bush’s net impact on health care was to saddle America with more statism. Indeed, I’d be curious to see some long-run numbers on the impact of Bush’s prescription drug entitlement and the terrible plan Obama just imposed on America. I wouldn’t be surprised to find out that the negative fiscal impact of both plans was comparable. Shifting gears, let’s now turn to education policy, where Thiessen writes:

Bush won a Supreme Court ruling declaring school vouchers constitutional and enacted the nation’s first school-choice program in the District of Columbia.

Bush deserves some credit on school choice, but his overall education record is characterized by more spending and centralization. Thanks in part to his no-bureaucrat-left-behind plan, the budget for the Department of Education grew significantly and federal spending on elementary, secondary, and vocational education more than doubled. Equally worrisome, federal bureaucrats gained more control over education policy. Finally, Thiessen brags about Bush’s record on Social Security reform:

Bush fought valiantly for a conservative priority no American president had ever dared to touch: Social Security reform, with private accounts that would have given millions of our citizens a stake in the free market system. His effort failed, but he deserves credit from conservatives for staking his second term in office on this effort.

This is an area where the former President does deserve some credit. So even though the White House’s failure to ever put forth a specific proposal was rather frustrating, at least Bush did talk about real reform and the country would be better off today if something had been enacted.

This addresses all the economic claims in Thiessen’s article, but we can’t give Bush a complete grade until we examine some of the other issues that were missing from the column. On regulatory issues, the biggest change implemented during the Bush year was probably Sarbanes-Oxley – a clear example of regulatory overkill. Another regulatory change, which turned out to be a ticking time bomb, was the expansion of the “affordable-lending” requirements for Fannie Mae and Freddie Mac.

And speaking of Fannie and Freddie, no analysis of Bush’s record would be complete without a discussion of bailouts. Without getting too deep in the issue, the most galling part of what Bush did was not necessarily recapitalizing the banking system (a good chunk of which was required by government deposit insurance anyhow), but rather the way it happened. During the savings & loan bailout 20 years ago, at least incompetent executives and negligent shareholders were wiped out. Government money was used, but only to pay off depositors and/or to pay healthy firms to absorb bankrupt institutions. Bush and Paulson, by contrast, exacerbated all the moral hazard issues by rescuing the executives and shareholders who helped create the mess. Last but not least, let’s not forget that Bush got the ball rolling on auto-industry bailouts.

If all of this means Bush is a “conservative record without parallel,” then Barack Obama must be the second coming of Ronald Reagan.

Washington Prospers While America Suffers

Unemployment in the heartland may be high and incomes may be stagnating in most of the nation, but Washington, DC, continues to be an oasis of prosperity as more of the nation’s resources get consumed by government. The latest evidence comes from the Washington Post, which reports on the federal government’s insatiable demand for more real estate.

Evidence of the federal government’s growing influence on Washington area commercial real estate is illustrated in big deals it is working on both sides of the table: auctioning a 127,000-square-foot Bethesda building previously occupied by the National Institutes of Health and moving to snatch up vast spaces in buildings on the private market that have been vacant for months. The General Services Administration is seeking to unload the 10-story building that the NIH vacated in 2002 when it consolidated offices into other buildings in Bethesda. The recommended opening bid for the online auction, which runs from April 30 to July 2, is $14 million. At the same time, federal leasing activity is expanding, according to Jones Lang LaSalle, the real estate firm representing the government. The government signed deals for 750,000 square feet of space in the District in the first quarter of 2010, compared with 670,000 square feet in the city for all of 2009.

It’s hard to pick out the most depressing part of the article. Signing leases for more space in the first quarter of 2010 than in all of 2009 might be at the top of the list. That is presumably a good (and discouraging) measure of the growth of government. But for those who enjoy reading about incompetence and inefficiency, the government’s eight-year (and counting) project to sell one office building may be at the top of the pile.

The GSA decided to sell the 46-year-old former NIH building at 7550 Wisconsin Ave. in Bethesda eight years ago. “We have a process we have to go through before we sell a building. We have to offer it to homeless housing, to local government,” said Bob Peck, commissioner for the GSA’s Public Buildings Service.

More discouraging factoids include a six-figure increase in the number of bureaucrats (just in the DC area), and the fact that the government is going to squander huge amounts of money on green renovations, which will require taxpayers to cough up lots of money for the contractors doing the work and for five-year leases (which probably means ten, knowing the sloth-like pace of government work) so the bureaucrats can be housed elsewhere during the work.

Expansion of the government’s role in the nation’s financial markets, increased defense spending and the new health-care law are driving its demand for more space. The government is expected to increase its Washington area payroll by as many as 100,000, according to Partnership for Public Service, a nonprofit group that helps the federal government find workers. “The government spent 2009 planning for the growth. We’re going to see the growth materialize in 2010,” said Scott Homa, research manager for Jones Lang LaSalle. The government also is overhauling many of its buildings, making them energy efficient. As a result, several agencies will need to lease space in the commercial market for five years or so during renovations.

The Flat Tax: Good for America, Bad for Washington

America’s biggest fiscal challenge is excessive government spending. The public sector is far too large today and it is projected to get much bigger in coming decades. But the corrupt and punitive internal revenue code is second on the list of fiscal problems. This new video, narrated by yours truly, explains how a flat tax would work and why it would promote growth and fairness. Something to keep in mind with tax day in just a couple of weeks.

There are two big hurdles that must be overcome to achieve tax reform. The first obstacle is that the class-warfare crowd wants the tax code to penalize success with high tax rates. That issue is addressed in the video in a couple of ways. I explain that fairness should be defined as treating all people equally, and I also point out that upper-income taxpayers are far more likely to benefit from all the deductions, credits, exemptions, preferences, and other loopholes in the tax code. The second obstacle, which is more of an inside-the-beltway issue, is that the current tax system is very rewarding for the iron triangle of lobbyists, politicians, and bureaucrats (or maybe iron rectangle if we include the tax preparation industry). There are tens of thousands of people who make very generous salaries precisely because the tax code is a playground for corrupt deal making. A flat tax for these folks would be like kryptonite for Superman. But more than two dozen nations around the world have implemented a flat tax, so hope springs eternal.

Why Is Obama Trying to Make America More Like Sweden when Swedes Are Trying to Be Less Like Sweden?

In this new video from the Center for Freedom and Prosperity, a Swedish economics student makes three important points.

  1. Sweden became a rich nation in the late 1800s and first half of the 1900s by relying a free markets and small government.
  2.  

  3. Growth deteriorated beginning in the 1970s after the imposition of high tax rates and a big increase in the burden of government spending.
  4. For the last 20 years, Swedish lawmakers have been trying to restore prosperity by lowering tax rates and adopting pro-market policies.

So if Swedes have learned from their mistakes and are now trying to reduce the size and scope of government, why are American politicians determined to repeat those mistakes? This is something to keep in mind with a looming vote on a giant expansion of the welfare state.

Senator Bunning Exposes Washington’s Fiscal Frauds

President Obama and many other politicians in Washington are big fans of pay-as-you-go budgeting, which means they want any new spending or tax relief offset (or “paid for”) with tax increases or spending cuts from other parts of the budget. Or at least that’s what they claim. But when Senator Bunning took them at their word and blocked a $10 billion spending bill because his colleagues were unwilling to make some tiny changes elsewhere, he was treated like a leper. Even his Republicans colleagues largely disapproved of his actions (so much for having learned any lessons from the drubbings they took at the polls in 2006 and 2008). Attacked from all sides, Bunning eventually relented in exchange for an offset vote (which was defeated, of course). What makes this episode interesting is not the specific policies that were being considered. As I posted earlier this week, Bunning was not even trying to shrink the size of government. Indeed, his “offset” was actually a tax increase (getting rid of a special tax break for paper manufacturing).

But this incident does expose the gross hypocrisy of the supposed deficit hawks in Washington. President Obama and the Democrats (and many Republicans) pretend they care about deficits, but their concerns magically disappear whenever there is a chance to buy votes by spending other people’s money. When tax cuts or tax increases are being debated, however, many of these same politicians piously declare their unwavering opposition to red ink (unless, of course, it’s a special tax break for a contributor). But perhaps it’s no surprise to discover that politicians think higher taxes are the solution to the over-spending problem in Washington.

What about the organizations that supposedly exist to fight deficits, such as the Concord Coalition and the Committee for a Responsible Federal Budget (they should be fighting spending instead, but let’s set that issue aside). Folks from these groups often ask politicians to be courageous and make “tough choices.” So I went to the Concord Coalition’s homepage and was shocked, shocked to find nothing about Bunning’s effort. I checked the blog and the press releases and found lots of tough rhetoric, but not one word of praise (or one word of any sort) for a Senator who tried to put the Concord Coalition’s words into action. And what about the Committee for a Responsible Federal Budget? Same song, second verse. Not a mention of Bunning on the homepage, blog, or in the press releases. (See update below)

Anybody care to make any predictions whether these groups will be similarly silent when President Obama’s “Fiscal Responsibility Commission” unveils a big tax hike?

Mea Culpa: On another matter, I have to confess an error. I did an interview for NBC affiliate stations on the financial mess at the Postal Service. I haven’t spent any time on that issue, so I quickly scanned some material from my Cato colleagues Chris Edwards and Tad DeHaven and saw that Congress had given an indirect bailout to the Postal Service by suspending $4 billion of required pre-funding for retiree health benefits. I then went on the air and said that this was a taxpayer subsidy for the Postal Service’s lavish pay and benefits. The Postal Service does have lavish pay and benefits, and the indirect bailout may lead to a direct infusion of taxpayer money at some point in the near future, but what I said I was wrong because no taxpayer money is currently being allocated (and I would have avoided the mistake if I paid closer attention to what Chris and Tad wrote). So, please, postal workers, don’t go…um…postal on me.

Mea Culpa, Part II: I am getting sloppy in my old age. Maya MacGuineas of the Committee for a Responsible Federal Budget nailed me fair and square. CFRB did say something nice about Bunning on its blog back on February 26. I should have scrolled down farther. I did just check the Concord Coalition blog, all the way back to the beginning of the year, and was relieved (from a personal perspective, not on policy grounds) to find no mention of Bunning’s effort.

The Fiscal Equivalent of Defining Deviancy Down

Senator Jim Bunning of Kentucky may be the most unpopular man in Washington right now. And, as you may surmise, this means he is doing something admirable (envision Jimmy Stewart in Mr. Smith Goes to Washington and you’ll have the right context).

Republicans and Democrats want to rush through a bill to spend more money on everything from highways to healthcare to joblessness. Senator Bunning is simply saying that the new spending should be financed by reallocating some of the unspent money from the so-called stimulus. For this modest proposal, Bunning is being treated like a porcupine at a nudist camp, with both Republicans and Democrats expressing irritation that he is making it harder for them to buy votes with other people’s money.

I am delighted that Senator Bunning is putting some roadblocks in the path of bigger government, but this episode also illustrates how our hopes and expectations have been eroded. For all intents and purposes, Sen. Bunning is saying that if we want to waste money on A, B, and C, then we should not waste as much money on X, Y, and Z.

Even in the unlikely event that he succeeds, all Bunning will have accomplished to keep a bloated federal government at its current size, which is about twice as big as it was when Bill Clinton left office about nine years ago.

Whatever happened to getting rid of the Department of Education and Department of Energy? Who has a proposal to get rid of the Department of Housing and Urban Development? Are any politicians even talking about getting rid of the Department of Transportation? Or Department of Commerce? I could go on, but I’m already getting suicidally depressed.

Three cheers for Senator Bunning, but it says a lot about the era of Bush-Obama profligacy that his very modest proposal is seen as a radical idea.

Great Moments in (Anti) Stimulus

There were many reasons to oppose last year’s so-called stimulus legislation. But perhaps one of the most compelling reasons is that politicians and bureaucrats inevitably do really stupid things because the federal budget is a racket designed to funnel the maximum amount of money to powerful interest groups. Here’s a great example from a story linked on Kausfiles.com. A city in New Hampshire wanted to stick its snout in the trough in order to subsidize a water treatment plant, but eventually decided to reject the money because the local government’s out-of-pocket costs would increase - primarily thanks to corrupt rules designed to line the pockets of union bosses, but also because of protectionist requirements and a mind-boggling $100,000 of paperwork expenses:

As stimulating as it might have sounded at the time, the city recently declined $2.5 million from the American Recovery and Reinvestment Act for its new water treatment plant because federal wage regulations would have forced the city to pay more for the project. …the low bidder — Penta Corporation — presented final cost of $21 million with the stimulus funds and $17.3 million without. So the city said thanks, but no thanks, to the stimulus funds. “It just didn’t make sense,” said Deputy Public Works Director David Allen. “It was going to cost us more money to take the money.” Stimulus funds mandate workers are paid using Davis-Bacon Wage Determination, which sets the pay scale for workers on federal projects and added $2.5 million to the bottom line. The “Buy American” provision would’ve added another $500,000 and Allen said there would have been significant administrative costs — upwards of $100,000 — for the city to track it the way the government requires over the course of the two-year project.