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Sunday, December 2, 2018

The Profligate President: A Midterm Review of George Bush’s Fiscal Policy Performance (Feb. 1991)

By Stephen Moore
The Cato Institute

Midway through his presidency, George Bush is mired in a fiscal policy crisis worse than anyone could have envisioned when he entered the Oval Office two years ago.

This crisis is the resurgence of record federal deficits. In January the Office of Management and Budget issued its budget forecast predicting that deficit spending will climb to a staggering $325 billion in 1992—not including the cost of Operation Desert Storm.(1) That is roughly $1 billion in federal borrowing each day. Even last year’s $140 billion five-year tax hike—the second largest ever—will not stem such a tidal wave of red ink.

The deterioration of America’s fiscal health cannot be blamed on the legacy of Reaganomics, as liberals have argued. Nor is it, as conservatives maintain, primarily the fault of the pro-spending coalitions in the Democrat-controlled Congress—although certainly some of the blame lies there. It is almost exclusively the creation of the Bush administration itself.

The crisis has been caused by an explosion of new domestic spending under Bush. Between the time that Reagan left the White House in 1989 and next year (FY 1992), domestic spending will have climbed by $300 billion—from $670 billion to $970 billion.(2) Since 1989 the federal government’s domestic outlays, adjusted for inflation, have grown by an enormous 10 percent per year.(3) Domestic spending is expanding at a faster clip under Bush than it did under other recent presidents typically labeled as big spenders, including Lyndon Johnson, Richard Nixon, and Jimmy Carter. Incredibly, Bush is on the way to being the biggest champion of new domestic spending since Franklin Roosevelt.

Some of the increases in spending may have been beyond the direct control of the White House. For instance, large domestic expenditures have been required to bail out the savings and loans—crisis that was not created by Bush.

Yet dozens of new spending programs—for education, space exploration, transportation, and the fight against drugs—have been launched, not over the Bush administration’s objections but with its endorsement and in some cases at its insistence.

They are expenditures that OMB director Richard Darman labels “investments in the future.” In dollar terms, over two years those “investments” have translated into increases of $34 billion for the Department of Health and Human Services, $18 billion for housing and related programs, $5.5 billion for agricultural programs, $4.7 billion for the Department of Education, and $2.5 billion for the Department of Energy.

In the early 1980s Reagan made an impassioned plea for the abolition of the latter two agencies. Last October Bush signed legislation to spend $40 billion a year for both.

Read the rest at The Cato Institute.