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Analysis: Budgeting without the brakes

By MARTIN HUTCHINSON   |   Jan. 21, 2004 at 8:06 PM   |   Comments

WASHINGTON, Jan. 21 (UPI) -- President George W. Bush's State of the Union address Tuesday contained one notable omission. It failed to propose any credible plan whereby the federal budget could be brought back under control.

It pretended to, of course. "In two weeks, I will send you a budget that funds the war, protects the homeland, and meets important domestic needs, while limiting the growth in discretionary spending to less than 4 percent."

However, that's more or less what the President said last year. And the year before. The reality is very different.

Federal spending in the year to September 2004, which is the budget currently undergoing final debate in the Senate, was budgeted to be only 3.34 percent above the final federal spending total for 2003. However, there has been some slippage. The current Congressional Budget Office estimate of 2004 spending (certainly low, because it is out of date -- a new estimate is due shortly) was already 5.33 percent above the final outcome for 2003.

More damagingly, the final outcome for 2003 was itself $29 billion above the original budget for 2003, while the currently estimated outcome for 2004 is $43 billion above the budget for 2004, with more to come.

The State of the Union address contained only modest additional proposals for spending. Full tax-deductibility of catastrophic health insurance coverage was announced, which sounds reasonable until you note that Bush didn't say the insurance cost would be deductible from taxable income, he said it would be deductible from tax itself -- thus effectively making the government pay 100 percent of everybody's catastrophic health insurance costs, but only for those rich enough to pay substantial amounts of income taxes.

Other spending initiatives were picayune. $23 million for school drug testing -- a drop in the bucket. Double federal funding for sex abstinence programs -- also cheap, if laughably ineffective. $300 million to assist prisoner reentry into society -- again, not much there to worry about.

But it's the big spending choices that have put the Federal budget deficit out of control.

The Medicare prescription drugs bill will cost $600 billion over 10 years -- and that's a number that has been massaged heavily downwards; don't for a moment imagine that it will cost only $60 billion a year once it gets going in 2006.

Federal education spending has increased by 50 percent since Bush came to office -- not so much "No child left behind" but no education bureaucrat forgotten!

Iraq's going to cost $87 billion this year -- and it seems most unlikely that U.S. forces will be out of Iraq next year, or indeed out of Afghanistan, another money pit about which little is written.

Then there's the tax cuts that need to be "made permanent" -- thus knocking out all the budget arithmetic under which "we can cut the deficit, in half over five years" -- in itself an unambitious target; it took them less than 2 years to double it. The Alternative Minimum Tax swings back in 2005, if not amended, to make 12 million middle class households fill out their entire Federal income tax return twice. It was originally imposed in 1969 to catch the very rare examples of oil billionaires -- 38 of them in 1968, if I remember -- who paid no income tax at all, but its rate has been increased and its lower limit unindexed for inflation for so long that it now forms an entirely spurious second income tax system, parallel to the first.

Removing the AMT's ill-effects will be hugely expensive, not because it has ever yielded all that much revenue, but because the 10 year projections on which the fatuous Federal budgeting system rests assume that it will suddenly start being applied to huge new sectors of the population, without adverse economic effects, thus magically solving all budget deficit problems.

However, Bush should not bear all the blame for this appalling mess. It was maverick Congressman John LeBoutillier who described former Speaker Tip O'Neill as being "like the Federal budget -- fat, bloated and out of control." His Republican successor Dennis Hastert, as a former wrestling coach, would doubtless body-slam LeBoutillier if he made any such invidious comparison today. Yet in his budgeting, if not in his fitness regimen, Hastert is indeed "fat, bloated and out of control" since, in every year in which he has been Speaker, the final budget has exceeded the original administration budget by at least $25 billion.

This is not inevitable; former Speaker Newt Gingrich, in 1996-99, brought the final Federal budget in at least $20 billion below the Clinton administration's request in every year. But Hastert, unlike Gingrich, is no ideologue of smaller government; indeed he was elected to replace Gingrich for precisely that reason. Every year therefore, Congressman and Senators get to play local Santa Claus at taxpayer expense.

This year, according to Brian Reidl of the Heritage Foundation, the pork barrel spending even extends to adding a single traffic light in the village of Briarcliff Manor, New York. Now Briarcliff Manor is a very pleasant, quite affluent place, that indeed from time to time experiences traffic problems. However, it has one enormous advantage, that enables it to pursue road safety at federal taxpayer expense: it is the residence of former president Bill Clinton, and occasionally, of Senator Hillary Clinton.

One's delighted to see that former president Clinton (if it is indeed he who is responsible) is taking an interest in local traffic management. It just seems a pity that the American taxpayer, rather than the former president's pension, or the former president's book deal, or the former president's speaking fees, is going to have to pay for this new hobby. Surely Marc Rich could have stumped up for his old friend and benefactor!

It should not be imagined that the pork-barrel spending instituted by Hastert and his cronies is only a one-off cost. Far from it. By increasing the final total of spending in each year, it allows the administration to add yet more goodies in the following year, while claiming that the Budget it presents to Congress represents only a modest increase over the Hastert-inflated final total of the previous year. For the fiscal years 2002 through 2004, the average Administration budget request was a moderate 4.79 percent per annum above the previous year's final spending total. However, when the Hastert spending inflation is included, the average budget request was 6.71 percent above the previous year's budget request, and the average final spending total was 6.83 percent above the previous year's final spending total.

Those who don't want the federal government to end up swallowing the U.S. economy seem likely to be effectively disfranchised in 2004. The leading Democrat candidates, with the partial exception of Senator John Edwards, D.-N.C., all have lots of ideas for spending more money than the Bush administration, funding their spending plans with a partial or total rollback of the Bush administration's tax cuts.

Bush himself is unlikely to "get religion" after the election -- after all, his father's administration was itself far more profligate in increasing public spending than either the Reagan administration that preceded it or the Clinton administration that followed. This is of course typical of liberal Republicans, of which Bush must surely now be counted as one; it was after all Nelson Rockefeller who almost bankrupted New York State and Herbert Hoover (derided by his conservative predecessor Calvin Coolidge as "the wonder boy") and not his successor Franklin Roosevelt, who started Federal government spending on its inexorable growth path.

Small government advocates' one hope is in Congress. Hastert in January 2005 will have been Speaker for six years, to little discernible benefit to the Republic. Surely the tattered remnants of "term limits" rhetoric can be used to replace him, not perhaps with a small government true believer like Gingrich, but at least with a tidy-minded and thrifty housekeeper, who can put the Congressional budgetary process into neutral, so that what comes out of the sausage machine at the end of the year is not hopelessly bloated beyond what the Administration puts in. Over a four year presidential term, that would save hundreds of billions of dollars, which would at least make a start on paying for the contents of Santa Bush's sleigh.

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