Commentary

Spending, Not Tax Cuts, Has Sent Deficit Spiraling

By Stephen Moore
This article originally appeared in the Chicago-Sun Times on February 8, 2005.
You know that fiscal sanity has flown south for the winter when Nancy Pelosi and Ted Kennedy are throwing eggs at the Republicans for their budget recklessness. Kennedy has been on a tirade about how George Bush took a $200 billion budget surplus and converted it into a $400 billion deficit.

President Bush released his 2006 budget of the United States government Monday. Bush requested just over $2.6 trillion in spending. That’s $2,600,000,000,000. If a Democrat proposed this sized budget, Republican fiscal hawks would squawk to the rafters of the Capitol Dome in protest. This is more money than the federal government spent in its first 120 years combined!

For fiscal conservatives the biggest question about the Bush second term is whether the reckless spending spree that this president launched four years ago will continue over these next four years. Let us hope not, because if the expenditure patterns continue, Bush will go down in American history as one of the biggest debt and spend presidents ever.

There are positive features to the budget that suggest a change of course. Bush would eliminate more than 100 useless agencies, and he would hold all domestic social spending to less than the rate of inflation. But because of the high cost of the war in Iraq, the budget still rises well above the overall inflation rate.

The Democrats continue to argue that the budget deficit explosion is a result of the Bush tax cut. Nice try, but that’s inconsistent with the facts. In fact, the 2003 reduction in the capital gains and dividend taxes has led to an increase in revenues, because it has led to an increase in economic growth and stock values.

The problem is spending. The latest ratings by the National Taxpayers Union tell us that during the 2003-04 session, only 13 members of Congress — a record low number — voted to actually reduce the overall outlays of the federal government.

Over the past 30 years, there have been only two periods when the federal budget actually shrank. The first instance was in 1981-82, when Ronald Reagan set a new course for the budget and his first two budgets actually reduced overall domestic spending after adjusting for inflation. The second time this happened was in 1995-96, the Contract with America period. In that two-year period, federal spending in real terms fell by almost 4 percent.

The problem is that in all the other years the federal budget has grown at a rate far above inflation. In 2002 the federal budget grew by almost 8 percent.

The goal of this new GOP Congress, with the largest majorities in my lifetime, should be to reduce government spending over the next two years in real terms. This is an achievable goal, especially given that the agency budgets have so massively gained ground in recent years. If Bush and the Republican Congress would make this the goal, even with the initiative to make the tax cuts permanent, the deficit, which now stands just north of $400 billion, would be easily cut in half four years from now — which is what Bush promised during the campaign.

Ronald Reagan once quipped that getting the budget under control is like protecting your virginity: You just have to say no. Republicans haven’t been saying “no” to the Washington spending establishment in recent years and that is why we face a fiscal ocean of debt.

What a bitter irony it would be if in 2006 Republicans lost the majorities in Congress they have spent two generations achieving, because voters decided that Pelosi and Kennedy Democrats would do a better job as fiscal stewards. As one freshman Republican, Louie Gomert of Texas, told me, “I came to Washington to replace the big-spending party, not to become a member of it.” Well said, and a lesson Republicans forget at their own peril.

Stephen Moore is president of the Free Enterprise Fund and a senior fellow at the Cato Institute.