Commentary

The Budget Deal: All Clintonites Now

By Stephen Moore
This article originally appeared in the Investor’s Business Daily.

The raised fists, wide-eyed grins and high fives exchanged by Republican leaders Newt Gingrich, Trent Lott and others after announcing Friday’s budget deal with the White House reveal just how much the Republican “revolution” has faltered in two years’ time.

A jubilant Gingrich said, “With this deal, we accomplish everything we set out to do in the ‘Contract with America.’ “

That’s hyperbole run amok. The Contract pledged, first and foremost, to shrink the federal enterprise. This deal launches billions of dollars of new domestic spending initiatives over the next five years. The Contract called for getting Washington out of the education business, not for the biggest hike in “education” spending in 10 years. And the Contract called for tax cuts two to three times what this deal offers.

To be sure, this budget deal is not the wholesale capitulation to the left that the ‘82 or ‘90 deals were: It doesn’t raise taxes; it cuts them. It chops the top capital gains tax rate to 20% from 28%. It slightly expands individual retirement accounts, and may double the exemption from the death tax to $1.2 million from $600,000. House leaders Dick Armey, Bill Archer and John Kasich deserve praise for insisting on these pro-growth initiatives as part of any pact with the White House.

But is the promised tax cut worth the quid pro quo of a flood of new Clintonite federal domestic spending initiatives? No. A deal that does nothing to starve Washington’s $1.7 trillion bloated beast does not leave taxpayers safe in the long run.

Politicians have broadcast the good news about the deal ad nauseam in the last few days. Here is some of the bad and the ugly:

· No balanced budget in 2002— or ever. More than half of the deal’s “savings” come only after the year 2000, when Bill Clinton will be long gone from the White House. But these five-year plans have never worked any better in Washington, D.C., than they did in the old Soviet Union.

The GOP Congress is now in the midst of flunking the first test of its balanced-budget resolve. To raise billions of dollars for the flood victims in South Dakota, Congress is moving not to cut other wasteful spending, but to raise the national debt.

· Inf1ated savings estimates. Don’t believe any of the “deficit savings” numbers in the popular press. The GOP has shamelessly adopted the Democrats’ ruse of proclaiming “cuts” in spending when it spends more than last year, but less than some inflated, fictitious baseline. So much for the GOP promise, two years back, to end this false advertising forever.

· An extra $60 billion to $70 billion in domestic discretionary spending over five years. This pot of money funds odious programs and agencies like the National Endowment for the Arts, Goals 2000, the Legal Services Corp., foreign aid, corporate welfare, midnight basketball and the Education and Energy departments. These programs— which should be slashed— will grow by roughly 5% a year.

This deal approves $80 billion more domestic discretionary spending over the next five years than President Clinton proposed in his own January ‘96 budget plan. This is fiscal progress?

· Phony entitlement cutbacks. The exalted $115 billion in Medicare savings (again, not true cuts, but cuts off a “baseline”) will probably come mainly from higher premiums (i.e. increased taxes on seniors) and more price controls on doctors and hospitals. These “reforms” do nothing to fix Medicare’s structural problems: they are arguably worse than doing nothing.

· Much less tax relief than meets the eye. Clinton describes the tax cut as “disciplined.” This is a euphemism for “very small.”

Add in the income tax hikes from the plan to change the consumer price index, and the deal’s tax relief, net, comes to just $70 billion over five years. And that’s out of an $8 trillion revenue base. And it is less than a third the size of Clinton’s ‘93 tax hike.

The typical family saves just one cent on every dollar it pays in taxes.

· Many new spending programs. This budget funds new education and environment programs and several new medical entitlements, including $5 billion on Medicaid for children. (Republicans, it seems, will give America the Clinton health-care plan, but on the installment plan.)

The ‘97 budget deal is not a catastrophe. But on balance it spends too much money— and in all the wrong places— to warrant support from fiscal conservatives. Despite Gingrich’s rhetoric, it is not the product of the populist “more freedom, less government” philosophy that drove Republicans into power in 1994.

Rather, the deal is in the mode of Dick Morris, the disgraced Clinton strategist who thinks it more important for leaders to look like centrists than to do what they know is best for the country.

When Republican leaders trumpet this bargain, they seem to be proclaiming: We are all Clintonites now.

Stephen Moore is director of fiscal policy studies at the Cato Institute.