February 03, 2005, 7:49 a.m.
Is the Money Where W’s Mouth Is?
The state of the coming budget.
By Veronique de Rugy
There is much to celebrate in George W. Bush's State of Union 2005 address. The president appears really committed to much-needed reform of the Social Security. Equally important, he is proposing to make his tax cuts permanent to encourage competition and move us closer to a simple and fair flat tax. Also, in an effort to restore the fiscal credibility of his administration, the president called on Congress to support a tough budget which reins in domestic spending. The president appears to have learned from his first-term mistakes. His speech Wednesday night contained much more detailed proposals about controlling the size of government. But there still remains the challenge of translating good rhetoric into fiscal actions — even vetoes, if required.
President Bush has a very bad track record of doing was he says he will do on the issue of federal spending, largely because he has failed to veto a single bill for spending too much money. In his State of the Union 2001, for instance, he said, "We have two choices. Even though we have already met our needs, we could spend the money on more and bigger government. [But] unrestrained government spending is a dangerous road to deficits, so we must take a different path." Yet, that year, total spending increased by eight percent compared to four percent the previous year under President Clinton. The administration argued then that much of the increase was driven by homeland-security and defense spending. But the data shows that in FY2002 spending increased in all areas. Defense discretionary outlays rose by 14 percent and nondefense increased by 12.5 percent.
In his 2002 State of the Union, Presdient Bush said "To achieve these great national objectives — to win the war, protect the homeland, and revitalize our economy — our budget will run a deficit that will be small and short term so long as Congress restrains spending and acts in a fiscally responsible way." That year, spending increased another 7.3 percent and discretionary spending was up a whooping 12.5 percent. Also, three years later the federal deficit has been pushed to a record $427 billion for FY2005. Although we should not obsess over the deficit per se, we should read it for what it is: a glaring sign that this administration is doing a very poor job with our money.
In his 2003 State of the Union address, the president explained, "The best way to address the deficit and move toward a balanced budget is to encourage economic growth and to show some spending discipline in Washington, D.C." Yet that year, the omnibus bill was jammed with 8,000 earmarked pork projects — such as $150,000 for the Rock School in Philadelphia and $250,000 for the Call Me Mister program at Clemson University — which the president then failed to veto.
And last year, the president underlined that "This [fiscal discipline] will require that Congress focus on priorities, cut wasteful spending, and be wise with the people's money. By doing so, we can cut the deficit in half over the next five years." But he did not veto the additional $37 billion that were added to his proposed budget by a pork-addicted Congress.
So when the president tells us that this time the administration is really committed to fiscal responsibility, one can at best be cautiously hopeful. The president, for instance, told us that "America's prosperity requires restraining the spending appetite of the federal government." But then he turns around and undermines his own rhetoric by giving a non-exhaustive list of over two dozens new or expanded spending initiatives such as funding for job-training and community colleges, small businesses to strong funding for leading-edge technology, from hydrogen-fueled cars to clean coal to renewable sources such as ethanol.
The good news is that unlike previous State of the Union addresses, the president did tell us that he was planning on cutting the budget and eliminating useless programs. He said "My budget substantially reduces or eliminates more than 150 government programs that are not getting results or duplicate current efforts or do not fulfill essential priorities." However, the lack of specifics makes it impossible to know whether these cuts would be enough to offset all of these new spending.
The president also explained that "I will send you a budget that holds the growth of discretionary spending below inflation," once again trusting Congress to resist the bipartisan temptation to spend our money unwisely. He also assures that we are "on track to cut the deficit in half by 2009." Yet this is the wrong measure of fiscal responsibility. Congress and the White House should be focusing on reducing the size of government, not just reducing their overspending. We should not forget that over the past four years, Congress and the president have cooperated to produce a 30-percent increase in spending, including a 36-percent increase in non-defense spending.
Finally, according to a senior administration official, this fiscal discipline will come in the form of a virtual freeze in discretionary spending unrelated to defense or homeland security. Yet, the portion of the budget Bush wants to restrain represents a small portion — less than one sixth — of the CBO estimated $2.425 trillion budget. In other words, these spending limits are somewhat meaningless.
President Bush's tax agenda is great news for the American people. His Social Security reform agenda is good for workers and retirees. But in order to maximize the economic benefits of these policies, the president needs to put our money where is mouth is and actually deliver on Wednesday night's budget promises.
— Veronique de Rugy is a research fellow at the American Enterprise Institute and an adjunct scholar at the Cato Institute.
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