What Fiscal Discipline?

June 14, 2003 • Commentary

J. Edward Carter’s guest column in the June 6 National Review Online entitled “True Fiscal Discipline” left us scratching our heads over here at the Cato Institute’s fiscal policy department. It was sort of like the Titanic — it started off as a nice voyage, but ended up ramming into an iceberg and sinking. In Carter’s case the ‘iceberg’ is his contention that Bush’s fiscal policies “embody” fiscal discipline.

On the tax side of the coin Carter will get little argument from us — there is no doubt that Bush has done an ample job of pushing the tax cut agenda. Great. But on the other side of the coin (spending) the Bush administration has been completely out to lunch.

Now, as Carter points out, it is true that when placed in the context of the economy’s size (GDP), Bush has overseen spending that falls largely in line with the past 50 years. But is this something most NRO readers would celebrate or label as “fiscal discipline”? We hope not.

According to the President’s FY2004 Budget, Bush is the biggest spender in 25 years. Even Jimmy Carter’s numbers are superior in real terms. Bill Clinton? Bush isn’t even close to Bubba. Bush Sr.? Sorry, no. Reagan? No again, but the Gipper does make for a great comparison given his iconic status on the right.

Bush is increasingly being compared to Ronald Reagan. Democrats criticize him for being like Reagan while Republicans praise him for it. Like Reagan, Bush has successfully lightened the tax burden on the American people, and has overseen a massive defense spending build‐​up. Given President Bush’s recent push for more pro‐​growth tax cuts combined with increased defense spending for the war on terrorism, the analogy is tempting. But Bush’s dismal record on spending when measured against Reagan’s nullifies this temptation.

Let’s look at the facts. If we compare the three‐​year percentage change in real spending during Reagan’s and Bush’s first terms, President Bush comes out as a profligate spender on his own and as compared to Reagan. Under President Bush, real total outlays are estimated to increase by 13.5 percent as opposed to 6.8 percent under Reagan. More importantly, total real discretionary outlays are set to increase by 19.5 percent under the Bush administration while they increased by only 2.8 percent under Reagan.

It gets worse. Discretionary spending is divided into two parts: defense spending and non‐​defense spending. When President Reagan pursued his defense buildup, he increased real defense discretionary outlays by 19.2 percent while cutting non‐​defense discretionary outlays by 13.5 percent. However, if estimates hold, President Bush will have increased real defense discretionary outlays by 21.2 percent‐​but non‐​defense discretionary outlays will have risen by 18 percent. Discretionary spending numbers are telling because they are determined in the annual appropriations process where the President has the most influence.

A cursory look at the real three‐​year percentage change in non‐​defense discretionary spending for selected budget categories during both presidents’ first term reveals that President Reagan managed to cut spending in most budget functions (see table). In contrast, Bush has not only failed to match Reagan in reducing spending, spending has actually gone up across‐​the‐​board, and often at exorbitant levels.

Of course, the argument can be made that it is unfair to lay excessive blame on President Bush for over‐​spending given that Congress technically controls the purse strings. The GOP‐​dominated Congress has delivered three‐​of‐​the‐​top‐​five largest spending sprees in American history — the other two occurred during World War II. Thus, President Bush appears to have inherited a Congress with established spendthrift credentials.

However, this excuse is diminished by the fact that Bush has not vetoed a single spending bill during his time in office. Instead, he has agreed to sign every piece of legislation crossing his desk, including a bloated farm bill and an intrusive education bill. In contrast, President Reagan vetoed 22 spending bills during his first three years in office.

In addition, President Bush has been the beneficiary of a considerably more favorable party arrangement in Congress. Although Republicans did control the Senate during Reagan’s first term, Democrats dominated the House‐​by a 100‐​seat margin at one point. President Bush on the other hand has had the luxury of a largely GOP- controlled Congress. While Reagan was sufficiently successful at taming a doubting and often hostile Congress, Bush has demonstrated a lack of conviction in tempering the spending desires of a comparatively receptive Hill.

Carter is basically correct in saying that “for more than 200 years America has thrived on a regimen of low taxes and limited government” (low & limited as compared to the rest of the world). But we can do much better. Yes, “true fiscal discipline” embraces the virtues of low taxation and limited government. Unfortunately, President Bush’s fiscal policies do not.

3 Year % Change in Real Discretionary Spending During Reagan and Bush's First Terms (Selected Categories)

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