A budget in denial

Author: Scot Lehigh

Published: February 11, 2005

GEORGE W. Bush may be about to have a David Stockman experience.

Stockman was Ronald Reagan's first budget director, a self-described radical ideologue who came to his post at the Office of Management and Budget convinced he could help the Gipper tame the ravenous beast they believed the federal government to be.

Five and a half years later, an older, wiser Stockman penned a memoir about his time at OMB.

He had come to realize that slashing government was much harder than he had envisaged, for a simple reason: The American people actually wanted the social programs that soften the rough edges of capitalism. Even some conservatives, given a chance to smite the supposed leviathan, looked ahead to their next election and decided they weren't so opposed to government after all.

Now, following four years in which he has spent like a 19th-century sailor aport after long months before the mast, the president has finally turned his attention to fiscal restraint. With his reelection victory, he believes he has the political capital to enact serious cuts in social programs.

But does he really? Politically, the incumbent has talked like a tax-cutting conservative while governing like a Rockefeller Republican. In his first term, massive borrowing let Bush escape any real domestic-policy pinch. Running for a second term, he got the political benefit of his tax cuts without paying the price with constituencies angered by programs cuts that would otherwise have been required to offset them.

Thus it strains credulity to argue that in reelecting Bush, voters endorsed a shrunken federal government. This, after all, is a president who in his first term failed to veto a single spending bill, who signed large increases in both farm subsidies and education spending. And who added a prescription drug benefit the cost of which has now almost doubled, to $720 billion, over the next 10 years. (On that score, it's worth noting that the Democrats, pandering to angry older voters, dutifully denounced the expensive new entitlement as insufficiently generous.)

Only with his reelection secured has Bush begun to address the huge deficits he's run to maintain his guns, butter, and tax cut policies. It would be nice to say the president has finally put an honest choice before the American people, but that isn't even true.

''It is a budget in denial," says Robert Bixby, executive director of the deficit-battling Concord Coalition.

The spending plan, for example, excludes post-2005 Iraq war expenses, the long-term cost of the 2001-03 tax cuts, the financing for the private Social Security accounts Bush wants, and most of the cost of adjusting the alternative minimum tax, which will soon hit at income levels lower than intended.

Nor, says Chris Edwards, director of tax policy studies at the Cato Institute, can the budget be called consistently lean, what with a big increase for NASA even as sublunary services like Amtrak are slashed.

''He is putting interplanetary transportation ahead of intercity transportation," quips Edwards.

We have had a number of serious budget problems over the past two decades. Their resolution required compromise on both sides. That has meant a presidential willingness to countenance tax hikes and a congressional acceptance of real fiscal discipline.

After his huge initial tax cut, Reagan, by Stockman's count, acceded to four tax increases to rein in the deficits. George H.W. Bush accepted an income-tax increase in 1990. Bill Clinton signed one in 1993.

All three presidents realized something had to be done on the revenue side.

Something has to be done now, too. The Center on Budget and Policy Priorities estimates that tax cuts since 2001 have accounted for almost half the swing from projected surplus to deficit in 2005.

As a share of GDP, federal revenues are now about where they were in the 1950s, back before Medicare, Medicaid, student loans, and dozens of other programs, notes Robert Reischauer, president of the Urban Institute and former CBO director.

But this president has insisted that rolling back any of his tax cuts -- 70 percent of whose benefit has gone to the top 20 percent of taxpayers -- are off the table.

That would mean deeper domestic cuts than voters are likely to accept.

''I think it is going to become clear that the American people have gotten used to a government that provides a wide array of services and greater protections from the uncertainties of capitalism," says Reischauer.

If so, George W. Bush will learn a lesson David Stockman absorbed almost two decades ago.