Topic: Government and Politics

Some Perspective on the President’s Budget Request

The White House has been spinning reporters all day with the claim that the new budget holds non-defense spending down, and in some cases even cuts some domestic spending from 2006 budget levels. 

To test the claim, I’ve compiled below the proposed fiscal 2008 inflation-adjusted growth rates for spending in the non-defense Cabinet-level agencies compared to the 2006 budget:

Real Proposed Change in 2008 Non-Defense Cabinet-Level Agency Budget vs. 2006 Budget Level
   
Agriculture -9.2%
Commerce 5.9%
Education -40.2%
Energy 6.1%
Health and Human Services 8.5%
Housing and Urban Development -0.2%
Interior 10.8%
Justice -1.7%
Labor 15.6%
Transportation 6.3%
Treasury 7.7%
Veterans Affairs 13.8%
EPA -10.9%
Total
4.1%

All told, there are five agencies that receive a cut in real dollars: Agriculture, Education, HUD, Justice, and the Environmental Protection Agency. Yet even by the White House’s own numbers, all of these programs combined will still grow beyond the 2006 levels by 4 percentage points above inflation. 

Still, we need to wonder: What does this standard really tell us? 

Not much. The 2006 budget levels were already bloated after a six-year Republican spending spree. What’s actually interesting to see is how much these agencies would grow — after adjusting for inflation and assuming Congress rubber-stamps the president’s new budget — when compared to budget levels on the day Bush assumed office: 

Real Proposed Change in 2008 Non-Defense Cabinet-Level Agency Budget vs. 2001 Budget Level
   
Agriculture 8.0%
Commerce 16.8%
Education 36.2%
Energy 10.7%
Health and Human Services 35.6%
Housing and Urban Development 8.3%
Interior 12.0%
Justice 7.7%
Labor 8.8%
Transportation 12.4%
Treasury 11.7%
Veterans Affairs 52.7%
EPA -12.8%
Total
22.4%

To put it another way: Bush’s new budget still does next to nothing to strip away most of the massive budget increases in domestic programs he signed into law since 2001. It’s the fiscal equivalent of a recovering alcoholic patting himself on the back for merely drinking six beers a day instead of eight.

Why 2012?

I’ll chime in with a broader analysis of the new Bush budget later. For now, it’s worth noting one of the big questions it raises: What’s so special about 2012? 

That’s the year the president claims the budget can be balanced while simultaneously renewing the Bush tax cuts. It’s also three fiscal years after Bush leaves office.

What the president could have done is propose a plan to balance the budget in two years. Revenues are on the upswing, so it could be accomplished — assuming you cut spending, that is. 

For a president who is, according to insiders, interested in bequeathing a healthy Republican Party to the 2008 presidential candidate, it seems there would be great value in simultaneously handing them a balanced federal budget while also showing voters there is still some inkling of interest in smaller government within the party. And it would eliminate the Democrats’ ability to use the deficit bogeyman as a reason to kill the Bush tax cuts that expire in 2010. 

Instead, President Bush resorted to increasing spending in almost all categories — in some cases, like the Pentagon budget, massively. It’s not a budget that supporters of small government can really sink their teeth into. It is weak sauce indeed.    

I’m Restraining Spending, But…

Like most politicians, President Bush is addicted to new spending initiatives. His budget message is always: “We need to restrain spending — except for all the exciting new investments and programs enhancements I want.”

It’s more of the same in the president’s new 2008 federal budget. The president wants to get credit for proposing to balance the budget four years after he has left office, yet here is some of the language from the budget’s “Overview”:

  • “Increased funding to combat terrorism and protect the homeland…”
  • “Enhanced diplomatic efforts … with additional resources…”
  • “Increase funding for nuclear detection, more secure borders…”
  • “American Competitiveness Initiative to increase federal investment…”
  • “Significant new resources” for No Child Left Behind, including “more funding to high schools…”
  • “Increases [in] the Pell Grant maximum award…”
  • “Increases [in] Academic Competitiveness Grants…”
  • “Advanced Energy Initiative” to improve energy reliability and increase the use of alternative fuels…

The Budget Overview does provide some details on proposed spending restraint: “In the Budget, each program was closely reviewed to determine if it is among the Nation’s top priorities…. [F]ailure to meet these criteria resulted in proposed termination or reduction of 141 programs for a savings of $12 billion.”

Total federal outlays in 2007 will be $2.784 trillion. Thus, programs that are “top priorities” of the Bush administration account for 99.6 percent of all spending.

Will we ever get a president who wants to make serious cuts and doesn’t have a lengthy spending wish list to send to Congress?

Aqua Teen Overreaction Force?

Boston officials investigating this week’s marketing campaign gone awry should be sure to include themselves in the scrutiny, asking if they overreacted to the incident.

A In case you missed the story, Cartoon Network, a division of Time Warner’s Turner Broadcasting, recently launched a “guerrilla marketing campaign” to promote its new adult-audience cartoon Aqua Teen Hunger Force. As part of the campaign, the network hired New York marketing firm Interference Inc. to place notepad-sized, electronically lit signs of the show’s “mooninite” characters in unusual locations around urban areas.

The campaign received little notice in New York, Los Angeles, Chicago, Atlanta, Seattle, Portland, San Francisco, Philadelphia, and Austin, Texas. But in Boston, public officials treated the signs as a possible terrorist threat, closing bridges, subway stations, roadways, and even part of the Charles River while bomb squads removed the signs.

Once the nature of the signs became known, Boston mayor Thomas Menino issued a press release blasting the campaign:

It is outrageous, in a post-9/11 world, that a company would use this type of marketing scheme. I am prepared to take any and all legal action against Turner Broadcasting and its affiliates for any and all expenses incurred during the response to today’s incidents.

Estimates for those expenses have already topped $1 million.

Boston officials’ initial concern is understandable and appropriate. Seeing an out-of-place object containing batteries, circuitry, and glowing lights is unsettling in these times and it should be investigated. But at what point should Boston officials have realized that the signs posed no threat, and called off the bomb squads?

This raises an issue that we often discuss here at Cato, and that has become especially important in the post-9/11 era: should we be more concerned about Type-1 errors (false positives) or Type-2 errors (false negatives)?

Detection systems, whether mechanical (burglar alarms, ultrasounds) or human (analysts, emergency services workers) are rarely error-free. Often, we have to decide whether we want a very sensitive detection system that likely will detect any real problem but also subjects us to Type-1 errors, or else a less sensitive system that likely won’t give us many false alarms but may also miss a real problem.

Boston officials’ bomb-squad response to the mooninite signs is a perfect example of a Type-1 error produced by a highly sensitive detection system. I suspect that government officials would defend the high sensitivity, saying “it’s better to be safe than sorry.”

But Type-1 errors can end up making us feel very sorry. The current Iraq War can be considered a Type-1 error resulting from the Bush administration’s high sensitivity to the threat posed by Saddam Hussein’s regime.

Or consider the 2002 Beltway sniper attacks, during which local schools publicized that they were in “lockdown mode” and keeping schoolchildren indoors — that is, they went into “better safe than sorry” mode. The snipers later told police that the schools’ pronouncements enticed the snipers to try to kill a child, and they ultimately wounded a 13-year-old as he arrived at his Bowie, Md., middle school.

For an excellent discussion of why 9/11 should not lead us to be too accepting of Type-1 errors, read Ohio State University national security professor John Mueller’s article “A False Sense of Insecurity?

EU vs. Gas-guzzlers

The commissioners of the European Union endlessly preach about the need for carbon taxes and costly regulations that will reduce the quality of life for regular people. But those same commissioners get driven around in low-mileage vehicles. Fortunately, they are getting attacked for this hypocritical attitude.

Sadly, the embarrassment will have little impact. American politicians — including President Bush — want to force Americans into smaller (and more dangerous) cars, yet periodic efforts to require them to live by the same rules have proved fruitless.

The EU Observer reports on the controversy in Brussels: 

EU commissioners are finding themselves under scrutiny to see if they are putting into practice the green values that Brussels is increasingly preaching, with most of the 120-strong fleet of officials cars comprising gas-guzzling, C02-emitting giants.

…[T]he vast majority of the 27 commissioners use the standard-issue vehicles such as Audis or Mercedes — high on security features but rather lower on environment friendliness — to be ferried here and there across Brussels; sometimes even the few hundred metres between commission buildings.

…A commission spokesperson said, “It’s an individual decision for commissioners what their service car should be but as a general rule, the commissioners choose cars that are functional and safe for what they are doing.”

The Libertarian Vote: New Returns Trickle In

Don’t miss the latest from David Kirby and me on the libertarian vote. In Cato Policy Report (pdf; less attractive HTML version here) we report the results of our Zogby International poll of 2006 voters.

In the Zogby survey, 15 percent of voters gave libertarian answers to our three questions. And those libertarian-leaning voters showed the same shift away from Republican candidates that we had identified in the 2004 election. Clearly, “two more years of war, wiretapping, and welfare-state social spending” had not brought back any of the wandering libertarians.

We did some new tests in the Zogby survey. We asked voters to identify themselves ideologically. Full results are in the article, but most respondents whom we identified as libertarian described themselves as “conservative” (41 percent) or “moderate” (31 percent). Only 9 percent called themselves “libertarian.”

But … when we asked half the respondents, “Would you describe yourself as fiscally conservative and socially liberal?” we were quite surprised that fully 59 percent said yes. And when we asked the other half of the sample, “Would you describe yourself as fiscally conservative and socially liberal, also known as libertarian?” we knew the number would go down. But it only went down to 44 percent. So 44 percent of American voters are willing to label themselves as “libertarian” if it’s defined as “fiscally conservative and socially liberal.”

We point out to Republican strategists:

After the 2000 election Karl Rove was convinced that 4 million Christian evangelicals had stayed home, and he was determined to get them to the polls in 2004. By our calculations, Republicans carried the libertarian vote by 5.5 million votes in the off-year election of 2002 and by only 2.9 million votes in 2006. That’s a swing of 2.6 million libertarian voters. Remember, it takes two new base voters to replace one swing voter who switches from one party to the other. Rove and his colleagues should have been watching out for the libertarian vote as well.

Read the article.

But wait, there’s more!

Since that article was written, David Kirby (whose number-crunching skills prove that you can actually learn something useful at the Kennedy School of Government) has analyzed newly released data from the American National Election Studies, the gold standard of public opinion research. ANES’s 2006 survey once again found that 16 percent of voters held libertarian values. And David found the following shifts from the 2002 midterm elections:

How Libertarians Voted

House              2002                2006 
D candidate       23                     46 
R candidate       70                     54 

In other words, among libertarians, the margin for Republican House candidates dropped from 47 to 8 points, a 39-point swing. (Note: ANES asked the question a slightly different way, so that votes for third-party or independent candidates were not recorded in 2006. Libertarian voters seem to vote for alternative candidates at a higher rate than other voters.)

Turning to the upper chamber,

Senate             2002                2006 
D candidate       15                     48 
R candidate       74                     52 

Among libertarians, the margin for Republican Senate candidates dropped from 59 to 4 points, a 54-point swing.

As we noted in the Cato Policy Report article, “To put this in perspective, front-page stories since the election have reported the dramatic 7-point shift of white conservative evangelicals away from the Republicans. The libertarian vote is about the same size as the religious right vote measured in exit polls, and it is subject to swings more than three times as large.”

We reiterate our advice above to Karl Rove, and invite Democratic strategists to look carefully at the gift that Republicans are offering them.

Much Regulatory Ado about Nothing?

This story has all the makings of a Shakespearean comedy: a public watchdog asleep at the switch, a scorned woman, and the silliness of politics.

(OK, I’m hyping a post about regulation. But really, the other elements are in here and it’s a good tale. So keep reading.)

SLEEPING WATCHDOG   Last January 18, President Bush quietly approved major changes to the federal regulatory review process. Federal agencies will now be required to offer greater justification for new regulations, estimate those regulations’ costs and benefits, and the White House will have oversight of agencies’ quasi-regulatory “guidance documents,” which until now have been largely free from executive review.

The changes initially went unnoticed by the media — almost. Lauren Morello of the energy & environment trade publication Greenwire (subscription required) ran a good article the next day (full disclosure: I was one of her interviewees). But, unless I missed it, none of the major media reported the story.

None, that is, until this week. On Tuesday, Bloomberg Media’s Cindy Skrzycki dutifully reported the changes in her column “The Regulators.” The same day, the New York Times ran the story front-page, above-the-fold. But for more than a week, the major policy change went unnoticed by the press, other than Greenwire. And, I might add, Greenwire did by far the best job of explaining the new policy’s substance and controversy.

THE SCORNED WOMAN   The policy change has been attributed to new White House regulatory affairs adviser Susan Dudley. Dudley came to national attention last summer, when President Bush nominated her to head the Office of Information and Regulatory Affairs (OIRA), a small but very important part of the Office of Management and Budget. At the time, Dudley was directing the Regulatory Studies Program at George Mason University’s Mercatus Center, and she has contributed a number of articles to Cato’s Regulation Magazine. (For a fun read, see her short article “A Regulated Day in the Life” from the Summer 2004 issue.)

Dudley’s nomination was met with considerable controversy, and even nastiness, reminiscent of the earlier OIRA fight over Harvard professor John D. Graham. Graham was ultimately approved by the Senate, but Dudley’s nomination never received a committee vote.

I have read some of Dudley’s work, and I’ve found it to be well reasoned and illustrative of issues of legitimate concern — even though I’ve sometimes disagreed with her conclusions. OIRA’s job, as I interpret it, is to scrutinize regulatory agencies’ proposals and require the agencies to justify why they would restrict people’s interactions and impose costs. Such scrutiny is, after all, part of deliberative policymaking. Perhaps Dudley’s scrutiny would have been unreasonably difficult, but a good OIRA chief would certainly ask the tough questions that Dudley’s analyses raise.

THE NEW POLICY   Technically, what President Bush did on Jan. 18 was issue Executive Order 13422, amending President Bill Clinton’s Executive Order 12866. EO 12866 pushes federal regulatory agencies to consider the costs of the various regulations they propose, and to examine alternative regulations that could accomplish the same goals at lower costs. EO 12866 also places several transparency and openness requirements on the regulatory process. Finally, EO 12866 gives OIRA a regulatory review role — albeit a less muscular one than what OIRA had under President Ronald Reagan’s Executive Order 12291. (For more on OIRA and EO 12866, read Dudley’s “Bush’s Rejuvenated OIRA” from the Winter 2001 Regulation.)

The new Bush amendments make four important changes to EO 12866:

  1. Regulatory agencies will have to identify what “market failure” a proposed regulation is intended to address. In other words, an agency will have to explain why the “problem” addressed by the proposed regulation cannot be solved through private action.
  2. Agencies must give some estimate of the aggregate costs and benefits of their regulations.
  3. Guidance documents, which give informal direction for how to comply with various federal regulations, will have to undergo OIRA review if they are considered “significant.”
  4. A political appointee in each agency will have oversight of that agency’s regulatory process.

The first amendment should be unobjectionable, at least on a theoretical level. ”Market failure” is the fundamental justification for government regulation (e.g., pollution should be regulated because no one “owns” the environment), so requiring a regulating agency to cite the relevant market failure when proposing a new regulation seems an appropriate requirement. Indeed, this requirement was part of the original EO 12866 and of President Ronal Reagan’s previous EO12291, but compliance with the requirement has been weak. That is unfortunate, because clearly identifying the market failure should help agencies to formulate effective and efficient regulations.

Likewise, the second amendment seems unobjectionable, at least in theory. Most citizens assume (incorrectly, it turns out) that government regulations undergo and pass a cost-benefit test. Requiring an estimation of the aggregate costs and benefits of regulation would help to ensure that regulation produces a net gain in public welfare — which, I take it, is the ultimate goal of regulation.

The third amendment involves guidances, a broad category of agency-issued documents that try to explain the application of various statutes and regulations. Guidances lack the force of law and also are not subject to the sort of rigorous review process that regulations are. Guidances are thus subject to a number of complaints, including that agencies do not adequately identify the documents as “advisory” and thus not having the force of law, and that agencies improperly use guidances as a way to expand government’s regulatory reach while avoiding the scrutiny of regulatory review. Those concerns are supposed to be addressed by the amendment’s subjecting “significant guidances” to OIRA scrutiny.

Finally, the fourth amendment is intended to put the regulatory process more under the control of the President. A justification for this change is that the public is better served if greater regulatory responsibility is taken by the appointees of an elected official than by career civil servants.

SILLY POLITICS   But is this shift in regulatory responsibility such a good thing? And, indeed, don’t each of the amendments put regulation more under the control of politicians? A good cost-benefit analysis or thoughtful consideration of market failure would certainly improve the regulatory process, but if politicians are in charge of the analysis (whether a President Bush or, say, a President Al Gore), could we trust the analysis they produce?

To be honest, I’m not sure whether we’d be better served by having the politicians, or the bureaucrats, lead the regulatory state. And I’m also not sure that the fight over EO 12866 matters.

In the Fall 2006 Regulation, New York Law School professor and environmental lawyer David Schoenbrod tells the disturbing story of the Environmental Protection Agency’s Faustian bargain. Schoenbrod claims that Congress created the EPA to be a whipping boy, making the difficult decisions and absorbing the abuse that Capitol Hill’s politicians want to avoid. Congress gets the accolades for voting to “save the environment”; the EPA gets the nightmare of figuring out how to do it, how much of it to save, and who absorbs the cost. And the EPA suffers the wrath of angered environmentalists and industrialists.

I would extend Schoenbrod’s analysis to all regulatory agencies: Congress is supposed to oversee the laws and consider the difficult tradeoffs implicit in regulation. But, because Congress has abdicated its duty, regulatory analysis has fallen to the White House and/or the federal bureaucracy — a situation that serves no one particularly well.

And what is more, it may not really matter whether the White House mandates additional regulatory analysis or who carries it out. As Rutgers University’s Stuart Shapiro argues in the Summer 2006 Regulation, the findings of regulatory analysis have surprisingly little effect on a proposed regulation; what seems to matter is the White House’s position on the regulation. If the White House likes the regulation, the regulation usually gets adopted regardless of the analysis; if the White House dislikes the regulation, it usually gets abandoned regardless of the analysis.

Despite the immense blood-feud over it, regulatory analysis seems to have neither produced the rational, low-cost regulatory paradise that proponents envisioned, nor the misery-plagued wasteland that opponents decried. Instead, as Cato chairman Bill Niskanen has cynically observed, regulatory analysts produce a bunch of lonely numbers that the politicians usually ignore. I suspect Bush’s EO 12866 amendments will produce more of the same — which is to say, the current brouhaha is much ado about nothing.

[Hat tip to Dr. Richard Belzer for correcting my description of EO 13422’s second amendment. You can read Dr. Belzer’s thoughts on EO 13422 at www.neutralsource.org.]