Jewish World Review Feb. 11, 2005 / 2 Adar I, 5765
Federal belt-tightening: You call that an austerity budget?
In its budget released this week, the Bush administration purports to
increase federal spending by 3.6 percent.
But that excludes likely supplementals, in particular for continuing
operations in Iraq and Afghanistan. Assuming an additional $75 billion for
those endeavors, less than was spent either last year or this, the
administration is actually proposing an increase in spending of 6.6
percent, or twice as much as population growth and inflation.
That's what passes for austerity in Washington these days.
President Bush would prefer to focus attention on so-called non-security
discretionary spending, which he proposes to modestly reduce. But such
spending - which excludes defense, homeland security and entitlements -
constitutes just 15 percent of the federal budget.
Moreover, the term "discretionary spending" is highly misleading. In fact,
the entire federal budget is discretionary. Congress is not required to
spend any particular amount on any particular thing.
Congress has chosen to put over half of the budget on automatic pilot
through entitlements. But there's nothing that prevents what is spent on
those programs from being changed at any time, except the lack of political
will to do so.
Moreover, taxpayers are on the hook for everything the federal government
spends, regardless of how politicians choose to label it. So, it's total
federal spending that's the important number.
And there, Bush's record is not very good. Even if his 2006 budget is
adopted, again assuming an Iraq supplemental, spending will have increased
at a 7 percent annual pace on his watch. It was half that during the
If Republicans really wanted to, there's an opportunity to do something
meaningful about federal spending and balancing the federal budget.
Despite the Bush tax cuts, federal revenue growth is quite strong.
Individual income taxes are projected to increase more than 10 percent this
year and over 8 percent next year. The Bush administration estimates that
they will increase more than 9 percent a year for the remainder of the
So, with true spending restraint, substantial progress could be made toward
balancing the budget while continuing and even advancing pro-growth tax
cuts and policies.
But true spending restraint requires more than simply trimming around the
edges of a small part of the federal budget. It requires reconfiguring what
the federal government does.
Subventions from the federal to state and local governments constitute $436
billion, or 16 percent, of the Bush budget. And, contrary to bellyaching by
state and local officials, that's up 37 percent during Bush's tenure.
From the standpoint of financial management and accountability, it makes
little sense to be shipping money to Washington only to have it shipped
There is no state too poor to pay to educate its children. And it's highly
doubtful that Washington politicos have a greater interest in doing it well
than state and local officials who are closer and more accountable.
The increased risk of terrorism argues for more coordination and
interaction between federal and state and local law enforcement agencies.
But it doesn't argue for a greater financial role for the federal
government in hiring and equipping firefighters and cops. Public safety
should have the first claim on the state and local fisc.
Nor is there any state too poor to pay for its own roads, public transit or
There is an argument for a federal role in low-income assistance programs,
which take up $368 billion, or 14 percent, of the Bush budget. Assuming the
poor would migrate to states with more generous benefits, liberals worry
that there would be a disincentive for local assistance without minimum
But currently, there's a perverse incentive for an upward spiral in
spending on programs such as Medicaid, where state officials make the
decision to expand coverage but the federal government picks up most of the
tab. In previous budgets, the Bush administration has proposed giving
states more latitude about coverage in exchange for converting the program
from an entitlement to a block grant.
The Bush budget proposes modest reductions in farm subsidies, but not
getting out of the commodity support business altogether. Nor does it seek
to alleviate the burden on young workers to pay for the health care and
retirement income of affluent seniors.
Republicans claim to be the party of smaller government and fiscal
discipline. But that's a tough claim to maintain given the Bush
administration's excessive pride over showing some modest spending
restraint over a small portion of the federal budget, and the fretting
among congressional Republicans that even that might be too much.
A budget that was truly moving toward fiscal discipline would look far
different than this one.
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