The Mises Institute monthly, free with membership
Volume 24, Number 3
How Bush Busted the Budget
The Washington Post’s Jonathan Weisman recently scored a front-page story about President Bush that would have galvanized DC conservatives three years earlier if the same words had been written about President Clinton.
Writes Weisman: "Confounding President Bush’s pledges to rein in government growth, federal discretionary spending expanded by 12.5 percent in the fiscal year that ended September 30, capping a two-year bulge that saw the government grow by more than 27 percent, according to preliminary spending figures from congressional budget panels. The sudden rise in spending subject to Congress’s annual discretion stands in marked contrast to the 1990s, when such discretionary spending rose an average of 2.4 percent a year. Not since 1980 and 1981 has federal spending risen at a similar clip. Before those two years, spending increases of this magnitude occurred at the height of the Vietnam War, 1966 to 1968."
Think it’s just about 9-11? Think again: "Much of the increase was driven by war in Afghanistan and Iraq, as well as homeland security spending after the attacks of Sept. 11, 2001. But spending has risen on domestic programs such as transportation and agriculture, as well."
One recalls the story about the first President Bush around the time that he was breaking his "No New Taxes" pledge—a profile in cowardice that would cost him reelection. While being pestered by reporters about his decision, he told them not to place as much importance in what he said as in what he did. "Read my hips," he told them, mockingly paraphrasing one of his signature lines.
This is a lesson that should be applied to George W. as well. While his political rhetoric is on target with an electorate that demands smaller government, his actions bring forth benighted memories of that other activist president from Texas, Lyndon Baines Johnson.
It wasn’t supposed to be this way. Did anyone who voted for Bush think that he would far surpass Clinton in expanding the Leviathan state? In 1999, Harvard University economist Martin Feldstein ominously warned in a Wall Street Journal op-ed that unless President Clinton’s budget plans were defeated by congressional Republicans, government spending would increase by $850 billion over the next decade, on top of the $2.5 trillion increase already called for in current law (much of which was off-budget spending).
Little did Feldstein realize that as he wrote, an even more aggressive spender was preparing a bid for the White House under the banner of fiscal restraint and a more humble foreign policy but who, once elected, would make the reckless Clinton look like the model of probity with respect to domestic and foreign policies. Under the Bush administration, the national debt will increase by more than $850 billion in two years.
Perhaps Feldstein should have checked with his colleague in the Harvard economics department, Jeffrey Frankel, who would not have been surprised by an even bigger government under a Republican president. In an important paper published last year, Frankel noted the discrepancy between the lips and hips of Republican presidents, resulting from Republican rhetoric creating an impression of fiscal responsibility (the lips), and the actual big government policies pursued by Republicans once they reach office (the hips).
In a Financial Times article summarizing the results of his research, Frankel wrote:
"Since the 1960s, the Republican and Democratic administrations have switched places on economic policy. The pattern is so well established that the generalization can no longer be denied: the Republicans have become the party of fiscal irresponsibility, trade restriction, big government and bad microeconomics."
Surprisingly, Democrat presidents have, relatively speaking, become the proponents of fiscal responsibility, free trade, competitive markets and neoclassical microeconomics. This characterization sounds implausible. Certainly, it would not be recognizable from the two parties’ rhetoric. But compare the records of Presidents Carter and Clinton with those of Presidents Reagan, Bush senior and Bush junior. A simple look at the federal budget statistics shows an uncanny tendency for the deficit to rise during Republican presidencies.
Although Frankel seems ignorant of the role that off-budget revenues had in skewing the budget deficit figures in the late 1990s, and although he seems to buy into the Keynesian consensus that tax cuts are the primary cause of deficits, his point that the budget performances of Republican vs. Democratic administrations are uncanny remains valid. What’s going on here?
Historically, the Republican Party has never been the party of fiscal restraint. It was defined by a neo-mercantile philosophy from its inception as the new Whig party in the 1850s up through the Progressive Era. Thanks to the massive realignment of power from the states and cities toward the federal government during Franklin Delano Roosevelt’s devastating 12-year presidency, the GOP was able to remarket itself as the relatively more fiscally responsible party. But that rhetoric never was matched by its actions. This is still true today.
And today, Bush is simply governing within the modern Republican tradition of allowing government to grow by mollifying a base that values a republican form of government that is out of step with the needs of the modern corporatist state. To appease this base, they are told that the geopolitical requirements inherent in a post–9-11 world have forced Bush to become a more reckless spender than he otherwise would have been, but that nonetheless, this spending is far less than what would have resulted if a mainstream Democrat were in office.
To the contrary, the events of 9-11 and their aftermath have been manipulated by the political class to weaken the opposition from a growing number of people who, throughout the 1990s, increasingly held the federal government in disrepute. As the 2000 county-by-county political election map indicates, the 35-year expansion of the welfare-warfare states resulted in a country sharply divided between those who depend on ever-expanding wealth transfers and those who fund them.
The Bush counties, in red, could be classified as (to borrow a term from Murray Rothbard) the net taxpayers, while the Gore counties, in blue, could be classified as net tax consumers. Clearly, some side had to give to reduce these tensions because a country so sharply divided between those disgusted with the government and those dependent on it cannot face a stable future.
One of the important political consequences of 9-11, and part of the impetus for the undeclared wars in Afghanistan and Iraq, is the quelling of resistance to big government that had grown to such a crescendo after the prima facie justification for big government disappeared with the end of the cold war. The result is that, for the time being, the federal government operates with much less scrutiny than ever before, and that those who would otherwise cheer its dismantlement withhold their fire out of the patriotic imperative not to weaken a president when the country is at war.
That such imperatives are important to the growth of government was pointed out over 60 years ago by Ludwig von Mises in his classic book, Liberalism. But Mises would also certainly agree with the contention of James Bovard in his new book Terrorism and Tyranny that nothing happened on 9-11 to make the federal government more competent.
These conclusions result when one observes the actions, as opposed to listening to the words, of those in power. Reading the lips of would-be caretakers is not enough. We must watch what they do and point out the consequences, with the knowledge that there is a large remnant that still cares.
Christopher Westley teaches economics at Jacksonville State University (email@example.com).