Overspending, In Context

I think I understand, for the most part, why I don't tend to get too overwrought over the Bush Administration's and congressional Republicans' overall spending spree.

On the one hand, fiscal hawks like Brian Reidl certainly make a strong case that government under GOP stewardship isn't exactly getting smaller:

Myth 1: Massive education cuts. From 2001 through 2006, nominal education spending will more than double — from $35 billion to $84 billion. That is not a misprint.

K-12 education spending increased from $23 billion to $40 billion, and college student financial aid skyrocketed from $10 billion to $40 billion. The remaining money was spent on research and general education aids....

Myth 2: Anti-poverty spending cuts. From 2001 through 2005, nominal antipoverty spending rose 39%, and is set to increase another 5% in 2006. In those four years, Medicaid caseloads increased by 10 million and Food Stamps caseloads by 8 million as their budgets expanded 40% and 71%, respectively. Combined payments from the refundable Child Tax Credit and the Earned Income Tax Credit (EITC) surged from $27 billion to $48 billion.

All four categories of anti-poverty spending — health care, food, housing and cash aid — grew by more than double the inflation rate, and significantly faster than under Bill Clinton.

Overall, anti-poverty spending reached 16% of the federal budget for the first time ever in 2002 and has remained above that since....

Myth 3: Slashed nonsecurity discretionary spending. Reports panicking about a proposed freeze in 2007 fail to provide any context. Even after a 2007 freeze, these programs will have risen 42% in Mr. Bush's first six years in the White House, versus 20% in Mr. Clinton's first six years.

Sounds pretty grim, doesn't it? As Reidl also points out, Republicans always get slapped with the rap that they're out to "gut" the federal budget when it comes to spending, just as they're lampooned as "blowing a hole in the deficit" when it comes to the revenue side. As the above numbers amply show, the only thing that turning the entire show over to the Pachyderms has done is demonstrate that one-party control obviates spending discipline no matter which party holds the reins.

However, as RCP's John McIntyre argues, that conclusion, and the argument that Ronald Reagan was a much stouter obstacle to government profligacy, lacks some crucial economic context:

[L]et’s take a look at the Reagan legacy on federal spending and deficits. In 1980, the last year of Jimmy Carter’s presidency, government outlays were running at 21.7% of GDP and the budget deficit was 2.7% of GDP. (The economy was also a basket case, which is when you would expect budget deficits to be at their worse.) In 1988, Reagan’s last year in office, outlays as a percent of GDP were running at 21.3% with a deficit of 3.1% of GDP. The budget deficit over Reagan’s eight years averaged 4.2% and ran as high as 6.0% in 1983.

Bush entered office with an economy that was booming: in 2000 government outlays ran at 18.4% of GDP with a budget surplus of 2.4%. But the stock market implosion, 9/11 and the war quickly changed the budget dynamics and the surplus switched to a deficit of 3.5% in 2003 and 3.6% in 2004. In 2005, the budget deficit came in at 2.6%, with government outlays running at 20.1% of GDP.

The point here is that there is lot of hyperventilating about the Bush Administration’s spending and “out of control” deficits, much of it by folks who praise Reagan yet trash Bush. But the most recent “out of control” Bush deficit at 2.6% of GDP is far below the eight-year Reagan average of 4.2%.

This is not meant to disparage Reagan, only to provide perspective. When you look at the numbers on a proportional basis - which is the only way to honestly compare different eras - Bush’s federal spending is not “out of control,” at least in comparison to Ronald Reagan.

Annnnd Reagan never had a Republican House, and lost the Senate after 1986. So the argument for divided government as a brake on spending at best works only if the Donks control the White House. Either or both houses of Congress? Fugedaboudit.

The key thing to keep in mind about the economy Dubya inherited is what McIntyre refers to as a "perfect storm" of economic shocks. Between the bursting of the dot.com bubble and the 9/11 attacks, we may have been in more dire straits than anybody realized at the time. I remember well the feeling of free-fall I had watching the Dow drop some two thousand points in the week or two after the New York Stock Exchange reopened. That's as close to a panic as we'd come since the original "Black Tuesday" seventy-two years before. If it hadn't have been for the "pre-emptive" first Bush tax cut, and its more supply-side oriented sibling two years later, the American private sector would not have weathered that "perfect storm," much less have grown at a 4% annual clip for the past three years. And wasn't growth the true theme of Reaganomics, as ironically vindicated during the Clinton years?

When I worry about runaway federal spending, I don't waste time on discretionary expenditures, which are an ever-shrinking slice of the budget pie in any case. I behold what is displacing them: entitlements, which Democrats are determined to preserve at ever more unsustainable levels, and Republicans are indellibly afraid of doing anything about. Last year's abortive attempt by the Bush White House to reform Social Security was probably our last, best chance to avert eventual economic Armageddon. Now it's just a matter of time before the Big Crunch makes Hurricane Katrina look like a soft summer shower.

But at least the Senate voted to extend the Bush tax cuts last week. So we'll be able to enjoy continued growth until the Second Great Depression descends or nuclear war with Iran breaks out, which ever comes first.

And they say we pro-growth types aren't optimists....