Let's look at some fiscal data that must be very depressing for President Obama and other advocates of big government.
Which means, of course, that this information must be very good news for American taxpayers!
Here's a chart looking at annual federal spending since 2000. You'll notice that spending skyrocketed from 2000-2009 (a time when libertarians were justifiably glum), but look at how the growth of government came to a screeching halt after 2009.
Here are some specific numbers culled from the OMB data and CBO data. In fiscal year 2009, the federal government spent about $3.52 trillion. In fiscal year 2014 (which ended on September 30), the federal government spent about $3.50 trillion.
In other words, there's been no growth in nominal government spending over the past five years. It hasn't received nearly as much attention as it deserves, but there's been a spending freeze in Washington.
Now let's look at what happens when government is put on a diet.
I've periodically discussed my Golden Rule, which says that good fiscal policy takes place when government spending grows slower than the private sector.
And even though we haven't had impressive growth during the Obama years, there have been modest increases in both nominal GDP as well as inflation-adjusted (real) GDP.
In other words, the Golden Rule has been in effect since 2009. As a result, the burden of government spending, relative to the economy's productive sector, has been declining.
Here's another chart that will be very depressing for the President and other statists.
What's really remarkable is that we've seen the biggest drop in the burden of government spending since the end of World War II.
Heck, the fiscal restraint over the past five years has resulted in a bigger drop in the relative size of government in America than what Switzerland achieved over the past ten years thanks to the "debt brake."
At this point, some readers may be wondering who or what deserves credit for this positive development. I'll offer a couple of explanations.
The first two points are about why we shouldn't overstate what's actually happened.
1. The good news is somewhat exaggerated because we had a huge spike in federal spending in 2009. To use an analogy, it's easy to lose some weight if you first go on a big eating binge for a couple of years.
2. Some of the fiscal discipline is illusory because certain revenues that flow to the Treasury, such as TARP repayments from banks, actually count as negative spending. I explained this phenomenon when measuring which Presidents have been the biggest spenders.
But there also are some real reasons why we've seen genuine spending restraint.
3. The "Tea Party" election of 2010 resulted in a GOP-controlled House that was somewhat sincere about controlling federal outlays.
4. The spending caps adopted as part of the debt limit fight in 2011 have curtailed spending increases as part of the appropriations process.
5. In the biggest fiscal loss President Obama has suffered, we got a sequester that reduced the growth of federal spending.
6. Many states have refused to expand Medicaid, notwithstanding the lure of temporary free money from Uncle Sam.
7. Government shutdown fights may be messy, but they tend to produce a greater amount of fiscal restraint.
And there are surely other reasons to list, including the long-overdue end of seemingly permanent unemployment benefits and falling defense outlays as forces are withdrawn from Iraq and Afghanistan.
The bottom line is that the past five years have been a victory for advocates of limited government.
But now for the bad news. All this progress will be wiped out very quickly if there's not genuine entitlement reform.
The long-run fiscal forecasts, whether from the Congressional Budget Office or from international bureaucracies such as the IMF, BIS, and OECD, show that America will become a European-style welfare state over the next couple of decades in the absence of significant changes to programs such as Social Security, Medicare, Medicaid, and Obamacare.
So let's enjoy our temporary victory but work even harder to avert a future fiscal crisis.
Notwithstanding the landslide rejection of Obama and his policies in the mid-term election, I don't think this will produce big changes in policy over the next two years.
Simply stated, supporters of limited government do not have the votes to override presidential vetoes, so there's no plausible strategy for achieving meaningful tax reform or genuine entitlement reform.
But that doesn't mean that there won't be important fiscal policy battles. I'm especially worried about whether we can hold on to the modest fiscal restraint (and sequester enforcement) we achieved as part of the 2011 debt limit fight.
Part of that victory was already negotiated away as part of the Ryan-Murray budget deal, to be sure, but there are still remaining budget caps that limit how fast politicians can increase so-called discretionary spending.
According to the Congressional Research Service, budget authority for defense is allowed to rise from $552 billion in 2014 to $644 billion in 2021. And budget authority for domestic programs is allowed to climb from $506 billion to $590 billion over the same period.
I think that's too much spending, but the interest groups, lobbyists, cronyists, politicians, bureaucrats, and other insiders in Washington would like much bigger increases. And you won't be surprised to learn that the Obama Administration also wants to bust the spending caps.
This is why I'm very worried that some Republicans are undercutting their negotiating position by saying that there will be no government shutdowns.
Let me explain how these issues are connected. At some point next year, Republicans on Capitol Hill will be responsible for putting together spending bills for the following fiscal year. They presumably (or am I being too optimistic?) will put together budget bills that comply with the existing spending caps.
Obama will then say he will veto such legislation and demand that Republicans unilaterally surrender by enacting bigger spending increases and also gutting sequestration. The GOP will then have two options:
A) they can surrender.
B) they can continue to send the President spending bills that comply with the law.
But if they go with option B and the President uses his veto pen, then the government shuts down. And even though the shutdown only occurs because the President wants to renege on the deal he signed in 2011, Republicans are afraid they'll get blamed.
The Washington Post reports on this fearful attitude, citing the anti-shutdown perspective of the incoming Senate Majority Leader.
A day after he won reelection and Republicans retook the Senate, Sen. Mitch McConnell (R-Ky.) left no doubt... “Let me make it clear: There will be no government shutdowns...,” McConnell said in a valedictory news conference in Louisville.
But that view irks some lawmakers who worry Obama will then have a blank check.
The first battle may revolve around immigration, but - as noted above - I'm more focused on fiscal fights.
But McConnell could be tripped up by the same conservative forces that have undercut Boehner since he became speaker in 2011. The issue this time is Obama’s expected executive action to overhaul the nation’s immigration system. ...conservatives...have urged McConnell and Boehner to fight back by allowing only a short-term budget bill that would keep government agencies open until early next year. These conservatives believe that once Republicans hold both chambers of Congress next year, they can force Obama to accept a budget bill that would prohibit him from implementing his executive order on immigration.
At this point in the article, the reporter, Paul Kane, engages in some anti-factual editorializing.
...the days of brinkmanship could return with a vengeance, and the government could once again be shut down. That could provide a devastating blow to Republicans, hurting their chance to win back the White House and hold on to their relatively slim Senate majority in 2016.
Huh?!? Republicans just won a landslide, so why are we supposed to believe last year's shutdown was "a devastating blow"?
Mr. Kane also refers to a shutdown later in the article as a "fiscal calamity" even though he shows no evidence (because there wasn't any) that government shutdowns cause any damage.
But there is at least one person who is convinced by this narrative. And that person, Senator McConnell, is preemptively trying to convince other GOP Senators to give Obama the upper hand in any fiscal negotiations.
McConnell’s advisers are worried enough that by Friday evening they were circulating a memo showing how damaging last year’s shutdown was to the Republican Party — an effort designed to counter conservatives who point to this month’s triumphant election as proof that the shutdown did little damage. ...The memo showed that in Gallup polling from late 2012 until this month, ...Republicans held steady just a couple of points lower through 2012 and most of 2013 — until the 16-day shutdown of the federal government in October 2013. In just a few weeks, the McConnell chart shows, Republican favorability plummeted 10 points. It has taken a year for it to climb back to where it was before the shutdown.
But who cares about "favorability" ratings. The poll that should really matter to Republicans is the one that takes place on election day.
And that seemed to be good news for the GOP.
Here's some of what I wrote in my post about lessons that could be learned from the 2014 elections.
Back in 2011, I explained that Republicans could play hard ball, largely based on what really happened during the 1995 government shutdown. And in 2013, I again defended a shutdown, pointing out that voters probably wouldn’t even notice that some government offices were closed, but they would remember that the GOP was branding itself as the anti-Obamacare party. The establishment, by contrast, thought the shutdown was a disaster for Republicans. ...many...Republicans felt the same way, excoriating Senator Cruz and others who wanted a line-in-the-sand fight over government-run healthcare. The moral of the story isn’t that shutdowns necessarily are politically desirable, but rather that it’s very important for a political party to find visible ways of linking itself to popular causes (such as ending Obamacare, fighting big government, etc).
At least one person agrees with me. Jeffrey Lord, writing for the American Spectator, points out the GOP establishment was wrong about the political impact of the 2013 government shutdown.
The whole event was giving prominent Republicans in and out of office the political willies. ...Republican senators, congressmen, governors, ex-office holders, potential presidential candidates, lobbyists and pundits...were spreading the word. That word? ...it was some version of curtains for the GOP. The party would be toast. ...they all got it wrong. Not just wrong, but Big Time Wrong. A week ago the Republican Party — barely a year away from the government shut down these folks were bewailing in various terms as bad strategy that “will lose more” for Republicans than Democrats — won a blowout election. ...Will Republicans learn anything here? ...Do you think Mitch McConnell makes the connection between the government shutdown of 2013 and the fact that he is about to become Senate Majority Leader?
But there's also no doubt that the GOP benefited by having a big public fight about Obamacare. Voters didn't remember the shutdown, but they did remember that Republicans were against the President's government-run healthcare scheme and they remembered that Democrats were for it.
I have no idea whether that made a difference in one Senate race of six Senate races, but Obamacare clearly was an albatross for Democrats.
In closing, I want to point out that there are limits to a shutdown strategy.
Picking a fight (or, more accurately, refusing to surrender to Obama) in 2015 is almost surely a winning strategy. But having the same fight in October of 2016 probably wouldn't be very smart, particularly since the establishment press would do everything possible to spin the fight in ways that advance Hillary Clinton (or some other left-leaning presidential nominee).
In other words, context matters. Pick the right fight.
But the bottom line is that Republicans - assuming they don't intend to acquiesce on every single issue - must be prepared to let Obama veto spending bills and shut down the government.
Returning to the American Spectator story, Ted Cruz may not be very popular with some of his colleagues, but I think he made an unassailable point about what happens if the GOP unilaterally disarms.
Cruz...asked them for their alternative. Cruz paused, then said that the response he got was “the sound of crickets chirping.”
P.S. One reason why Republicans are skittish about shutdowns is that they think they last the 1995 fight with Bill Clinton. But if you lived through that battle (or if you look at contemporaneous news reports), it's clear the Republicans had the upper hand.
P.P.S. Here are the five lessons I shared immediately after the 2013 shutdown fight.
P.P.P.S. If you want to enjoy some shutdown humor, click here, here, here, and here. And if you prefer sequester cartoons, click here, here, here, here, here, and (my favorite) here.
There's a saying in sports that teams that come back to win in the final minutes often "snatch victory from the jaws of defeat ."
I don't like that phrase because it reminds me of the painful way my beloved Georgia Bulldogs were defeated a couple of weeks ago by Auburn.
But I also don't like the saying because it describes what President Obama and other advocates of big government must be thinking now that Republicans apparently are about to do away with the sequester.
Specifically, the GOP appears willing to give away the sequester's real and meaningful spending restraint and replace that fiscal discipline with a package of gimmicks and new revenues.
I warned last month that something like this might happen, but even a pessimist like me didn't envision such a big defeat for fiscal responsibility.
You may be thinking to yourself that even the "stupid party" couldn't be foolish enough to save Obama from his biggest defeat, but check out these excerpts from a Wall Street Journal report.
Sen. Patty Murray (D., Wash.) and Rep. Paul Ryan (R., Wis.), chief negotiators for their parties, are closing in on a deal... At issue are efforts to craft a compromise that would ease across-the-board spending cuts due to take effect in January, known as the sequester, and replace them with a mix of increased fees and cuts in mandatory spending programs.
The supposed cuts wouldn't include any genuine entitlement reform. And there would be back-door tax hikes.
Officials familiar with the talks say negotiators are stitching together a package of offsets to the planned sequester cuts that would include none of the major cuts in Medicare or other entitlement programs that Mr. Ryan has wanted... Instead, it would include more targeted and arcane measures, such as increased fees for airport-security and federal guarantees of private pensions.
The package may get even worse before the ink is dry.
Democrats on Thursday stepped up their demands in advance of the closing days of negotiations between Ms. Murray and Mr. Ryan. House Democratic Leader Nancy Pelosi (D., Calif.) brought a fresh demand to the table by saying she wouldn't support any budget deal unless in included or was accompanied by an agreement to renew expanded unemployment benefits that expire before the end of the year—which would be a major threat to any deal.
Gee, wouldn't that be wonderful. Not only would the GOPers surrender the sequester and acquiesce to some tax hikes, but they could also condemn unemployed people to further joblessness and despair.
That's even worse than the part of the plan that would increase taxes on airline travel to further subsidize the Keystone Cops of the TSA.
But look at the bright side—for D.C. insiders. If the sequester is gutted, that will be a big victory for lobbyists. That means they'll get larger bonuses, which means their kids will have even more presents under the Christmas tree.
As for the rest of the nation? Well, you can't make an omelet without breaking a few eggs.
P.S.: I suppose we should consider ourselves lucky that this looming agreement isn't as bad as some past budget deals, such as the read-my-lips fiasco of 1990.
On Monday, I reported here and on the WashingtonWatch.com blog how Congress was trying to push through a bill that hadn't been passed in the same form by both the House and Senate.
Well, the Senate solved the problem by lying. It said that the Secretary of the Senate had erred in engrossing the bill--preparing it for transmittal to the House.
There was no error on the part of the Secretary of the Senate. The Senate passed a bill that used only the word "account" and the House-passed bill said "accounts." The bills weren't identical, but the Senate is calling it the Secretary's error.
The "fixed" bill now includes a quite non-grammatical sentence. I detailed that in a new WashingtonWatch.com post entitled: "From Farce to Tragedy." But who needs precision when you're moving a mere quarter-billion dollars around?
Were he to enforce it, President Obama's Sunlight Before Signing promise would require more careful deliberation than this. The public would have five days to review legislation, exposing errors like this and bringing disrepute on those responsible. But the president received the bill on Tuesday and signed it on Wednesday.
Something fishy happened on Friday, and without further action in Congress it should scuttle the legislation to exempt the Federal Aviation Administration from sequestration-based spending limits. But maybe the old saying, "close only counts in horseshoes and handgrenades," also applies to Senate unanimous consent agreements. If President Obama gives the bill five days of public review under his Sunlight Before Signing promise, perhaps it can be hashed out before anyone does anything foolish.
You're probably aware of the background: Across-the-board spending cuts were threatening air travel delays because of FAA furloughs. Late last week, the House and Senate both passed bills to allow the Department of Transportation to move money around, clearing up that problem. (No new spending; just movement of funds from lower priorities to air traffic control.)
As I detailed on the WashingtonWatch.com blog late Saturday, the Senate and then the House passed identical bills, but determined to see the House version passed into law. Because the House would pass its bill after the Senate was gone for the week, the Senate agreed to automatically pass a bill coming from the House "identical" to the one it had passed. Problem solved.
But on Friday afternoon, after the House had passed its identical bill, sponsor Rep. Tom Latham (R-IA) came to the floor and asked unanimous consent to change the word "account" to "accounts" in his bill. The change is a mystery. My guess is that the reference to a singular appropriation account would not allow needed flexibility because there are many FAA accounts. But the change also made the sentence ungrammatical as it has a second reference to a singular account.
Whatever the reason, there was a reason. And after changing the legislation, it was no longer identical to the Senate-passed bill. Thus, the bill sent to the Senate could not be automatically passed. Accordingly, the bill does not go to the president and does not become law.
Now, is the difference between the singular and the plural of the word "account" small enough that the Senate can go ahead and treat the bills as identical? That threatens the meaning of the word "identical." It certainly mattered in the House. Procedure expert Walter Oleszek calls unanimous consent agreements of this type "akin to a negotiated 'contract' among all Senators, [which] can only be changed by another unanimous consent agreement."
The House-passed bill not being identical to the Senate-passed bill, the better approach is to find that the Senate unanimous consent agreement does not apply, and the House bill should sit in the Senate awaiting further action.
At the time of this writing, no public sources indicate that H.R. 1765 has been passed in the Senate, presented to the president, or signed. If President Obama does receive the bill, he should give it the five days of public review that he promised as a campaigner in 2008. This would allow things to get sorted out, so that we avoid the constitutionally embarassing spectacle (and future Jeopardy/Trivial Pursuit item) of a president sitting down to sign a piece of paper that is not actually a bill readied to become a law.
I believe in the First Amendment, so I would never support legislation to restrict political speech or curtail the ability of people to petition the government.
That being said, I despise the corrupt Washington game of obtaining unearned wealth thanks to the sleazy interaction of lobbyists, politicians, bureaucrats, and interest groups.
So you can imagine my unfettered joy when reading about how this odious process is being curtailed by sequestration. Here are some cheerful details from story in Roll Call.
...sequester cuts...reflect not only Washington’s political paralysis but a bitter lobbying failure for K Street interests across the board. From university professors and scientists to cancer victims, defense contractors and federal workers, hundreds of advocacy, trade and labor groups have lobbied aggressively for months to head off the cuts. They’ve run ads, testified on Capitol Hill, staged demonstrations and hounded lawmakers, all to no avail. ...the path forward could be a lobbying nightmare.
Reading the story, I recalled a Charles Addams cartoon from my childhood. Thanks to the magic of Al Gore's Internet, I found it.
Slightly modified to capture my spirit of elation, here it is for you to enjoy.
Except I like to think I'm a bit more prepossessing than the Uncle Fester character, but let's not get hung up on details.
What matters is that sequestration was a much-needed and very welcome victory for taxpayers. Obama suffered a rare defeat, as did the cronyists who get rich by working the system.
To be sure, all that we've achieved is a tiny reduction in the growth of federal spending (the budget will be $2.4 trillion bigger in 10 years rather than $2.5 trillion bigger). But a journey of many trillions of dollars begins with a first step.
The budget battles in Washington, D.C., are far from over. President Obama’s attempt to break the stalemate by reaching across the aisle and dining with GOP members two days in a row seems more about show than substance.
The apparent lack of urgency to undo the cuts underscores what we knew all along: the world did not end under sequestration. Most of the cuts will be phased in over the next few months. The defense cuts amount to just 6.5 percent of total spending on national security (Pentagon base budget plus war costs). This is a pittance, and spending will still dwarf what we spent before 9/11. Those who claim that the cuts will undermine American security should explain how we managed to win the Cold War while spending much less, on average. (To learn more about proposals that would maintain a highly capable, but less costly, military, attend our event on March 14th.)
There is still the possibility that most of this year’s cuts, or the caps on planned spending over the next decade, may not materialize. Congress could reverse the cuts in the future as part of a grand bargain. Or they could simply punt without one. Meanwhile, legislation is moving along that would allow the Pentagon and other agencies to implement the cuts with greater discretion across department programs. This is a good thing, potentially. Smarter cuts are desirable, but we should be on the lookout to ensure that Congress doesn’t simply legislate away any cuts, dumb or otherwise.
Nonetheless, the fact that military spending actually declined is a small victory. But how will future battles play out? Are the neocons and their supporters in retreat? In a piece running today at Foreign Policy, I offer a cautionary note. Just because the fiscal hawks won this time doesn’t mean that they'll win the next one, or the one after that:
The defense contractors and special interests still have enormous firepower in Washington, and they've turned their attention to the "continuing resolution" that will fund the government for the remainder of the year. Meanwhile, the neoconservatives are single-minded and relentless. Their tenacity paid off in their bid to launch a war in Iraq and depose Saddam Hussein, but failed to stop Chuck Hagel's nomination and eventual confirmation as secretary of defense.
The budget fight matters even more. A $470 billion military is more than sufficient to fight the wars the United States truly needs to fight, but not the wars that the neocons want to fight. The next phase in the fight over the Pentagon's budget should focus less on how much the United States spends on defense, but rather why it spends so much. If we are going to give our military less than it expected to have three or four years ago, we need to think about asking it to do less.