WASHINGTON — The White House released its plans for the 2008 federal budget today. Costing nearly $3 trillion, the proposed budget is optimistic about future economic growth and fiscal discipline. Three Cato Institute scholars assessed its strengths and weaknesses:
Chris Edwards, director of tax policy studies and author of Downsizing the Federal Government:
“Conveniently, most of Bush’s proposed budget restraint comes after he has left office. But rather than assuming that the next president will be more fiscally responsible than himself, Bush should push this year to terminate wasteful federal activities. Good candidates for full termination are farm subsidies, the manned space program, foreign economic aid, and community development grants to the states.
“Federal revenues soared to 18.5 percent of gross domestic product in 2007, and will rise to 18.6 percent by 2012 even with all the Bush tax cuts extended. These revenues are above historical average revenues since 1960 of 18.2 percent. The strong growth in revenues indicates that there is budget room for full repeal of the complex alternative minimum tax (AMT). The president’s proposal of only a one‐year extension of AMT relief is smoke‐and‐mirrors budgeting.”
Stephen Slivinski, director of budget studies and author of Buck Wild: How Republicans Broke the Bank and Became the Party of Big Government:
“There is at least one good thing about the new Bush budget. It includes a much‐needed proposal to cap agriculture subsidies, the biggest corporate welfare program in the entire federal budget. Such a proposal is vital and welcome as a prelude to what promises to be a bruising battle over the next farm bill.
“The lack of ambition in the budget is manifest. This year’s list of 140 programs slated for termination or cuts is composed mainly of programs that have been on the chopping block in each of the last two Bush budgets. Virtually none of the program cuts were enacted in those years. Instead President Bush seems content with simply photo‐copying last year’s list instead of renewing a broader push for budget cuts.
“In order to balance the budget by 2012, total spending would have to grow no faster than 3 percent each year. But the budget has, on average, grown more than twice that fast each year since 2001. One of the big questions that the Bush budget raises is: What’s so special about 2012? The president could have presented a plan that actually cuts spending and balances the budget by the time he leaves office. It might have helped repair some of the damage of the past six years during which Republicans successfully destroyed the image of the GOP as a party of small government. And balancing the budget in the next two years would completely eliminate the ability of Democrats to use the deficit as a reason to kill the Bush tax cuts. Instead, the president focused on 2012 — three years after he’s left office. This is hardly a way to signal to voters that Republicans are still the party of small government.”
Dan Mitchell, senior fellow:
“The bad news is that the White House proposes to increase overall spending by 4.2 percent, significantly faster than needed to keep pace with inflation. But if the President holds firm on this number, it would be the smallest increase since taking office, so at least the country is headed in the wrong direction at a slower rate. Tax revenues, meanwhile, are now above the historical average. This shows that lower tax rates help boost economic performance, which results in a bigger tax base. Unfortunately, since some policy makers mistakenly believe that a falling deficit should be the main goal of fiscal policy, the continued growth in tax revenue may have the unfortunate effect of weakening the already limited commitment to bring federal spending under control.”