Jewish World Review Jan. 28, 2004 /5 Shevat 5764
President must not make Nixon's mistakes
A polarizing Republican president, reviled by liberals,
unseats the Democrats, talks like a conservative, but then
sails blithely into a cataract of red ink. President Bush's
record is beginning to shape up that way, uncannily resembling
the record of Ronald Reagan?
Well, yes, the resemblance is there for all to see, and
Bush no doubt draws reassurance from it. A sharp fiscal
deterioration fed by reductions in taxes, increases in defense
spending, and a recession: Where have we seen this before?
From a fiscal point of view, however, the early 2000s resemble
not just the early 1980s and the Reagan era but also
perhaps even more the early 1970s and the Nixon era.
Which is not a resemblance that Bush or the Republican leadership
in Congress should find reassuring.
On the principle that, once in a while, the past provides
some insight into the future, consider for a moment the
Nixon era, defined broadly to include the Ford administration,
which largely continued Nixon's domestic policies.
The economy boomed in the 1960s, growing at 4.7 percent
a year (in inflation-adjusted dollars), on average, from
1962 to 1968. Revenues poured in the door, and President
Johnson and the Democratic Congress then as now, the
same party controlled both branches celebrated the bounty
with a host of federal initiatives. But stingy Southern
conservatives still ruled the Capitol, and so Johnson tended
to seed the ground with fistfuls of new but small programs,
most of them funded modestly but good for lines in speeches.
(Some of them, notably Medicare, were acorns from which
mighty oaks would grow, but that would come later.)
Except in the peak war year of 1968, deficits in the prosperous
1960s ran at or below about 1 percent of the gross domestic
product. The war was expensive, and for a while, Johnson
tried having guns and butter, but in June of 1968, shortly
before the election, he imposed a 10 percent surtax on individuals
and corporations. That and some finagling helped him post
a small surplus for fiscal 1969. But the surtax was temporary
(it ended in 1970). As Johnson's term ended, the country's
fiscal situation was unsettled. The next president could
make things a good deal better, or he could make them much
Along came Nixon. Not a man known for making things better.
Nixon cared little for domestic policy, but he regarded
himself as a conservative reformer, he wanted to make a
mark on history, and he was swayed by the enlightened economic
wisdom of his day, which was liberal by today's standards.
Above all, Nixon, being Nixon, was determined to snatch
up every inch of desirable political real estate, rather
than give a Democratic opponent anything to run on.
And so he watered and fertilized LBJ's Great Society seedlings
while proposing not a few big-government initiatives of
his own most memorably a "Family Assistance Plan" that
would have guaranteed a federal payment of $1,600 (about
$8,000 in today's money) to every family of four with no
income, a scheme that would have added as many as 12 million
people to the welfare rolls. (To their everlasting regret,
congressional liberals helped kill the plan, insisting it
was too stingy a mistake their successors did not repeat
last year with Bush's new prescription drug benefit for
Medicare.) Nondefense discretionary spending, 3.2 percent
of GDP in fiscal 1969, rose to 4 percent in fiscal 1975
and to 4.6 percent by fiscal 1977, President Ford's last
Nixon spent even faster on entitlements. Fearing that an
economic downturn might damage his re-election prospects,
he agreed in 1972 to a stunning 20 percent permanent increase
in Social Security benefits. The increase originated with
House Ways and Means Committee Chairman Wilbur Mills of
Arkansas, a Democrat who got it into his head to run for
president. Nixon, determined as ever not to be outflanked,
briefly resisted but then, waving his hat, climbed aboard
the gravy train. He signed the increase into law in September
1972, in time for seniors to receive their fattened checks
on October 1, a month before the election.
The increase was so large that it accounted for more than
half of the growth in personal income in the fourth quarter
of 1972. In case anyone missed the point, the administration
helpfully sent out notices letting seniors know that their
Social Security checks had swelled.
Thanks to that and other examples of Nixon's generosity,
entitlement spending grew from 6.5 percent of GDP in 1969
to 10.6 percent in 1975, an unprecedented increase. Nixon
managed to pay for more than half of this new domestic spending
by cutting defense as the Vietnam War wound down. But the
peace dividend proved to be merely a temporary windfall;
the defense cuts overshot, and detente collapsed. By the
late 1970s, President Carter found himself obliged to reverse
course and begin a defense buildup, which Reagan accelerated.
And so, by the time of Ford and Carter, the government was
running chronic deficits of between 2 and 4 percent of GDP.
Filling that fiscal hole was to be the preoccupation of
every president from Carter to Clinton.
Reagan is generally blamed for the deficit crisis of the
1980s and early 1990s. He certainly made a bad situation
worse, running a deficit that reached a recessionary peak
of 6 percent of GDP. Remember, though, that the deficit
was already 2.6 percent of GDP when Reagan took office,
and it was 2.8 percent when he left. He and Congress revoked
a substantial share of the 1981 tax cut, and by 1987 the
defense budget was coming down almost as fast as it had
In other words, Reagan doubled the deficit as a share of
GDP, but only briefly. The underlying fiscal dislocation
was largely the work of Nixon, who let no, helped
federal spending run away from federal revenues, not just
for a while but for good. Resolving Reagan's fiscal rupture
that is, reducing the deficit to pre-Reagan levels, as
a share of GDP took only four years (from 1983 to 1987);
resolving Nixon's took 20.
And George W. Bush? Obviously, he is personally not much
like Nixon. But his fiscal legacy looks in danger of being
similar. The budget, firmly in surplus when he took office,
is now in the red, possibly for years to come; his tax cuts
and spending increases account for much, though far from
all, of the change. Congress, by exceeding Bush's spending
requests, has compounded the problem. With the budgetary
vise of the Baby Boom generation's retirement soon to begin
closing, the country may be on the verge of a 20-year fiscal
crisis much like the one Nixon bequeathed.
"After only three years in office, President Bush may be
heading to the record books as one of the biggest-spending
presidents," writes Veronique de Rugy, a fiscal policy analyst,
in a new Cato Institute report ("The Republican Spending
Explosion"). She notes that real spending increases in fiscal
2002, 2003, and 2004 have averaged more than 7 percent
versus 1.5 percent over the past 40 years.
The administration retorts that most of the spending increases
are attributable to the economic downturn, homeland security,
and Iraq exceptional circumstances that required exceptional
responses. Fair enough, but a policy isn't exceptional if
it goes on forever. "Justifications for borrowing have now
run out," says Maya MacGuineas, the executive director of
the Committee for a Responsible Federal Budget, a nonpartisan
anti-deficit group. "The higher security-spending needs
we have are no longer temporary, economic growth has picked
up, and there's really no reason not to pay for all the
spending that we decide the government is going to engage
Well, there is one reason: Repairing the fiscal breach would
require Bush to set priorities and make trade-offs, something
he, like Nixon, has been conspicuously reluctant to do.
Even Nixon, though, promised in 1969 to produce a sizable
("not token") surplus in five years. "It's remarkable that
a Republican administration doesn't even have a plan to
at least put the deficit on a glide path to zero," says
Chris Edwards, Cato's director of fiscal policy studies.
"They just say half in five years."
Given that 2004 is an election year, austerity may be too
much to expect when Bush releases his budget next month.
But at a bare minimum, says MacGuineas, "you shouldn't see
any tax cuts or spending increases that aren't paid for,
and in fact you should see a plan for how to put us on a
path to budget balance."
In 1972, Nixon faced a choice between political one-upmanship
and fiscal grown-upmanship, and we all know which he chose.
But Nixon was as crass an opportunist as ever entered American
politics. Bush is a better sort of man. Isn't he?
JWR contributor Jonathan Rauch is a senior writer and columnist for National Journal. Comment by clicking here.
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© 2002, The Atlantic Monthly, from where this is reprinted