Author Archive
Precedents in Government Growth
As an opponent of government growth, I’m interested in what we can learn from history to help us reverse the trend going forward. We need to understand the mechanisms of government growth if we are to combat the disease.
In a new Federal Reserve Bank of St. Louis article, Thomas Garrett and coauthors provide a useful overview of explanations for the federal government’s historical growth. They note that while the economic depression of the 1930s helped boost the size of the government, the severe recession of the 1890s did not do so. What was the difference between the 1890s and the 1930s?
The authors identify a number of factors that paved the way for sustained federal growth beginning in the 1930s:
- Path Dependency. Governments have inertia such that once a program is in place it is difficult to remove. When new programs are added during crises, they take root and aren’t cancelled when the crisis passes. Thus, government programs tend to accumulate over time.
- Tax Bases. The addition of new tax bases provides the means of government expansion. The best example is the addition of the federal income tax in 1913, which fueled huge government growth in subsequent decades. This can be called “feeding the beast.”
- Ideology. The rise of populism and progressivism during the late 19th and early 20th century broke down the traditional American resistance to big government.
I would add an additional cause of growth: legislative precedent. Politicians push the envelope on their allowable powers, and they build on the power grabs of prior policymakers. This is evident, for example, when you look at the steady destruction of federalism over the last century due to the growth in federal aid to the states.
Wyden-Gregg Tax Plan
Senators Ron Wyden and Judd Gregg recently introduced the “Bipartisan Tax Fairness and Simplification Act.” There is alot of interest in this plan, so I’ve put together some “pros” and “cons” from my small-government, flat-tax perspective.
INDIVIDUAL TAX CHANGES – PRO
- Scraps the alternative minimum tax.
- Cuts the number of rates from six to three.
- Reduces the tax subsidy for municipal bonds.
- Creates Lifetime Savings Accounts (LSAs)–like Roths IRAs except better because all withdrawals are tax-free. This is a very important reform, and by the way, one that Canada has enacted already. See here.
INDIVIDUAL TAX CHANGES – CON
- Keeps the top tax rate at 35 percent, which is quite a bit higher than the 28 percent acheived by the Tax Reform Act of 1986.
- Increases the top capital gains and dividend tax rate from 15 percent to 23 percent.
- Triples the standard deduction, which would likely take more people at the bottom end off the income tax rolls. That would simplify the code, but at the expense of increasing the demand for big government.
- Repeals the exclusion on income earned abroad by U.S. citizens, which would likely damage the operations of U.S. multinational companies.
- Retains all the most distortionary tax breaks under the individual code, including the mortgage interest deduction.
CORPORATE TAX CHANGES – PRO
- Cuts the top corporate tax rate to 24 percent. This is a crucial reform.
- Cuts corporate welfare spending, which Wyden-Gregg notes is about $90 billion a year, based on a Cato Institute analysis.
CORPORATE TAX CHANGES – CON
- Subjects the foreign income of U.S. multinational companies to immediate taxation. That tax approach is not followed by any major advanced economy, and it would put U.S. firms at a disadvantage in global markets.
- Broadens the business tax base in other ways that move in the wrong direction, such as repealing the expensing of energy exploration and development costs. Note that some of the plan’s corporate base broadening ideas make sense–such as reducing the value of interest deductions–but only if the revenue raised is used to reduce the statutory rate (which it does seem to be here).
Overall, I would take the Wyden-Gregg plan over the current code. But Wyden-Gregg is a very limited reform compared to the Paul Ryan two-rate individual tax or the recent National Academy of Sciences tax plan, which features individual rates of 10 and 25 percent and a corporate rate of 25 percent.
Wyden-Gregg is a start, but it hardly simplifies the tax code at all and it doesn’t reduce individual rates. However, it does cut the corporate rate and it includes LSAs, which would revolutionize personal savings. So we can take heart that supply side tax policies still garner some support on Capitol Hill.
For more on tax reform, see here.
John Berry: Angry about Federal Pay
The head of the federal Office of Personnel Management, John Berry, has become unhinged by a few recent critiques of federal worker pay. Berry is an Obama appointee who apparently views his role as being a one-sided lobbyist for worker interests, rather than a public servant balancing the interests of taxpayers and federal agencies.
Here is an 11-minute audio interview with Berry on Federal News Radio on Friday, where he lashes out at USA Today, Washington Times, and the Cato Institute. Berry is defensive, emotional, and unwilling to accept that new data might indicate a possible problem with the underpaid federal worker thesis that is constantly pushed by the unions.
What do I mean when I say he is unhinged? An investigation by the USA Today found that in 83 percent of 216 occupations examined, federal workers earned more than comparable private-sector workers. Here is Berry’s response when asked whether he thinks the USA Today analysis is a good one: “It is absolutely not! It comes straight out of the Cato Institute!” But, believe it or not, the nation’s largest newspaper is not part of some libertarian plot.
The most troubling aspect of Berry’s performance is his deliberate effort to wrap himself in the flag and deny that anyone should even ask questions about federal workers during a time of national security concerns. It is strange that an Obama administration official would so vigorously use the Bush administration tactic of “waving the bloody shirt.”
Filed under: Government and Politics; Tax and Budget Policy
Federal Pay Gap Reversed
I’ve long raised concerns about the rapidly rising costs of federal worker pay and benefits. Despite the obvious acceleration of federal compensation above private compensation in recent years, federal unions have continued to claim that federal workers suffer from a giant “pay gap,” which is currently supposed to be 26 percent.
Unfortunately, the pay gap mythology has been spread by Washington Post reporters, one recently writing, “The budget answers critics … who say federal civilians earn much more than private-sector workers… [G]overnment figures indicate that federal employees are underpaid by 26 percent compared with their counterparts in similar position in the business world.”
The Post is generally a great paper, but they seem to have blinders on with respect to federal pay issues. As a result, the USA Today has repeatedly scooped them. USA Today has a groundbreaking piece today revealing that in job-to-job comparisons, federal workers typically have wages 20 percent higher than private-sector workers.
Instead of federal workers suffering from a 26-percent “pay gap,” they actually have a 20-percent advantage over private sector workers. And that doesn’t include benefits, which are four times higher in the federal government than in the private sector, on average.
How could the federal unions get it so wrong? The calculation of the supposed 26-percent pay gap is reported in this annual memo. But the underlying calculations are extremely complex, non-transparent, and subject to a huge degree of statistical modeling.
Six Reasons to Downsize the Federal Government
1. Additional federal spending transfers resources from the more productive private sector to the less productive public sector of the economy. The bulk of federal spending goes toward subsidies and benefit payments, which generally do not enhance economic productivity. With lower productivity, average American incomes will fall.
2. As federal spending rises, it creates pressure to raise taxes now and in the future. Higher taxes reduce incentives for productive activities such as working, saving, investing, and starting businesses. Higher taxes also increase incentives to engage in unproductive activities such as tax avoidance.
3. Much federal spending is wasteful and many federal programs are mismanaged. Cost overruns, fraud and abuse, and other bureaucratic failures are endemic in many agencies. It’s true that failures also occur in the private sector, but they are weeded out by competition, bankruptcy, and other market forces. We need to similarly weed out government failures.
4. Federal programs often benefit special interest groups while harming the broader interests of the general public. How is that possible in a democracy? The answer is that logrolling or horse-trading in Congress allows programs to be enacted even though they are only favored by minorities of legislators and voters. One solution is to impose a legal or constitutional cap on the overall federal budget to force politicians to make spending trade-offs.
5. Many federal programs cause active damage to society, in addition to the damage caused by the higher taxes needed to fund them. Programs usually distort markets and they sometimes cause social and environmental damage. Some examples are housing subsidies that helped to cause the financial crises, welfare programs that have created dependency, and farm subsidies that have harmed the environment.
6. The expansion of the federal government in recent decades runs counter to the American tradition of federalism. Federal functions should be “few and defined” in James Madison’s words, with most government activities left to the states. The explosion in federal aid to the states since the 1960s has strangled diversity and innovation in state governments because aid has been accompanied by a mass of one-size-fits-all regulations.
For more, see DownsizingGovernment.org.
Taxes and Small Business
I testified to the Senate Finance Committee today regarding taxes and small business. My testimony is posted here.
President Obama plans to raise the top two individual income tax rates. That will not be good for business or the economy. A little more than half of all business income in the United States is reported on individual returns, not corporate returns. Of the business income reported on individual returns, 44 percent is in the top two income tax brackets.
My testimony pointed out that while Congress cut the top individual rate by 5 percentage points this past decade, the average top rate in the 30 OECD countries also fell by 5 percentage points, as shown in the chart below.
If the top federal rate rises to 40 percent next year, the United States will have the ninth highest top individual rate in the OECD, including state-level taxes. We’ve already got the second-highest corporate tax rate in the OECD.
A nation that has been a relative bastion of market capitalism and individual achievement has a tax code that is becoming very hostile to high-earners, entrepreneurs, and businesses of all types.
Five Decades of Federal Spending
The chart below shows federal spending in three component parts over the last five decades. It includes Obama’s proposed spending in 2011. Here are a few thoughts on the recent spending trends:
Defense: In the post-9/11 years, defense spending bumped up to a higher plateau of around 4 percent of GDP. But now we have jumped to an even higher level of around 4.9 percent of GDP.
Interest: The Federal Reserve’s easy money policies reduced federal interest payments in recent years. That is coming to an end. Obama’s budget shows that interest payments will start rising rapidly next year and hit 3 percent of GDP by 2015. And that’s an optimistic projection.
Nondefense: This category includes all other federal spending. After a steady decline during the Clinton years to 12.9 percent of GDP, President Bush pushed up nondefense spending to a higher plateau of around 14.5 percent. Then came the recession and financial crisis, and the Bush-Obama tag team hiked spending to an even higher level of around 19 percent of GDP. That level of nondefense spending is almost double the level in 1970 measured as a share of the economy.
Karl Rove’s Spending
Former George W. Bush adviser Karl Rove enjoys complaining about the spendthrift ways of President Obama and the Democrats. But I noted in a Wall Street Journal letter today:
Annual average real spending grew faster under President George W. Bush than any president since Lyndon Johnson… Even leaving out defense, President Bush was the biggest spender since Republican Richard Nixon.
My letter pointed to two prior op-eds by Rove, but he was at it again yesterday in the Journal. He said that his former boss “cut in half the growth of discretionary domestic spending from the sizzling 16 percent rate of President Bill Clinton’s last budget.” Call me crazy, but I don’t think supporting domestic spending growth of 8 percent during a time of very low inflation is an acheivement to crow about.
Over at National Review, Veronique de Rugy apparently gets just as annoyed as I do hearing big-spending Republicans complain about big-spending Democrats.
Mr. Rove’s columns are usually very interesting, but I’d like to see him accept at least some of the blame for the exploding size of government during his tenure at the White House.
Here are the data on spending by presidents.
Filed under: Government and Politics; Tax and Budget Policy
Obama’s Spending Freeze
President Obama is apparently planning to freeze a portion of federal spending for three years. The portion to be frozen is discretionary spending less spending on defense, homeland security, and veteran’s affairs. That portion of spending–about 13 percent of the overall budget–would be held to $447 billion between FY2010 and FY2012.
The chart puts the freeze in context by illustrating the recent growth in this portion of the federal budget. The data is in “budget authority,” which is the amount of new spending authorized each year. Note that a portion of that authorized spending usually splashes over into subsequent years.
The first thing to note is that the portion of the budget to be frozen grew 60 percent between 2000 and 2008, during a period of low inflation. And since this portion of spending excludes defense, homeland security, and veterans affairs, it has nothing to do with the reponse to 9/11 or various foreign wars.
Then comes 2009 and the massive “stimulus” bill, which pushed up spending on this part of the budget to $699 billion. Finally, the figure shows the freeze at $447 billion, which is 71 percent higher than the level of authorized spending in 2000.
Here’s the important point: a very large part of the 2009 spending spike of $699 billion will be sloshing forward into 2010 and later years. (As illustrated by my fancy arrow in the chart). The new CBO budget estimates (Table A-1) show that only 18 percent of authorized stimulus funding will be spent in 2009, with the rest sloshing forward.
Obama is ”freezing” the budget only because he already has a large amount of cash floating around from the stimulus bill that he can spend on all his favorite big government projects in 2010 and beyond. In budget-speak, federal spending measured in “outlays” will be far from frozen.
Finally, a president’s proposals for discretionary spending beyond the current budget year are meaningless. Obama will be back with a new budget in February 2011, no doubt with a whole new set of assumptions and priorities.
Data note: chart data of budget authority from OMB, Mid-Session Review, Table S-14, and budget historical tables.
Federal Subsidy Programs Top 2,000!
January 22, 2010 is a day that should live in infamy, at least among believers in limited government. On that day, the federal government added its 2,000th subsidy program for individuals, businesses, or state and local governments.
The number of federal subsidy programs soared 21 percent during the 1990s and 40 percent during the 2000s. The entire nation is jumping aboard Washington’s gravy train. My assistant, Amy Mandler, noticed the recent addition of two new Department of Justice programs, and that pushed us over the threshold to reach 2,001.
There is a federal subsidy program for every year that has passed since Emperor Augustus held sway in Rome. We’ve gone from bread and circuses to food stamps, the National Endowment for the Arts, and 1,999 other hand-out programs from the imperial city on the Potomac.
Figure 1 shows that the number of federal subsidy programs has almost doubled since the mid-1980s after some modest cutbacks under President Ronald Reagan.
Most people are aware that federal spending is soaring, but the federal government is also increasing the scope of its activities, intervening in many areas that used to be left to state governments, businesses, charities, and individuals. To measure the widening scope, Figure 1 uses the program count from current and past editions of the Catalog of Federal Domestic Assistance. The CFDA is an official compilation of all federal aid programs, including grants, loans, insurance, scholarships, and other types of benefits.
Figure 2 shows the number of subsidy programs listed in the CFDA by federal department. It is a rough guide to the areas in society in which the government is most in violation of federalism—the constitutional principle that the federal government ought not to encroach on activities that are properly state, local, and private.
As the federal octopus extends its tentacles ever further, state governments are becoming no more than regional subdivisions of the national government, businesses and nonprofit groups are becoming tools of the state, and individualism is giving way to a more European desire for cradle-to-grave dependency.
Yet recent election results indicate that Americans may be starting to wake up and fight back. Whether we are more successful than Cicero and Cato the Younger in battling to retain our limited-government republic remains to be seen.
Filed under: Government and Politics; Tax and Budget Policy
Vermont’s Education Spending
I happened to catch the January 7 State of the State speech by Gov. Jim Douglas of Vermont on C-SPAN. It was a sober and serious presentation that laid out the facts about higher taxes and excessive spending, which are problems in just about every state.
Douglas on excessive education staffing Vermont:
Since 1997, school staffing levels have increased by 23 percent, while our student population has decreased by 11.5 percent. The number of teacher’s aides has gone up 43 percent. The number of support staff has gone up 48 percent. For every four fewer students a new teacher, teacher’s aide or staff person was hired. There are 11 students for every teacher – the lowest ratio in the country – and a staggering five students for every adult in our schools. With personnel costs accounting for 80 percent of total school spending, it’s no wonder that our K-12 system is among the most expensive in the nation at $14,000 per student per year.
Current staffing and compensation levels cannot be maintained as the student count continues to decline. If we simply move from our current 11 to 1 student/teacher ratio to 13 to 1, we would still have one of the lowest ratios in the country, while saving as much as $100 million. If we want to make education costs sustainable, we must return balance to classrooms. I propose that over four years we bring our statewide student/teacher ratio to affordable levels.
Douglas on excessive education bureaucracy:
Our school governance structures are a vestige of the 19th century and, like our unsustainable personnel costs, must be reformed. We have 290 separate school districts –- one for every 312 students –- 63 different supervisory bodies and a State Board of Education. That’s a total of 354 different education governing bodies for a state with only 251 towns.
Douglas on education financing:
At the root of our education funding challenge is a system that’s substantially eroding local control. Each year the connection between your school budget vote and your property tax bill becomes more and more distant. . . our education funding regime has grown into an unmanageable maze of exemptions, deductions, prebates, rebates, cost-shifts and hidden funding sources. Overlapping rings of complexity keep all but a few experts from understanding the many moving pieces. This is not good tax policy, not good government, and, if you ask most Vermonters, not good for much of anything. It’s time to pull back the curtains and let the sun shine in on how education is funded. Transparency – Who is paying? What are we paying for? What are the results?
Douglas on excessive education regulations:
Currently, Vermont schools are prohibited by law from accessing out-of-state distance learning programs … If a school sought to provide a new Chinese program for this student, or even a group of students, they would have to hire a new teacher with the expertise – a costly step. Allowing students to access approved distance learning programs from around the country is a simple, affordable change we can make to improve quality.
Excessive staffing, complex bureaucracy, complex financing, and excessive regulation are problems in government education systems across the country. There is no better time than today, when states have large budget gaps, to tackle these chronic problems.
So kudos to Douglas. His speech was a contrast to that of Colorado’s Gov. Bill Ritter, who followed him on C-SPAN uttering the usual lofty but vacuous speech we expect of most politicians.
Filed under: Education and Child Policy; Tax and Budget Policy
Reforming the Insane Tax Code
We’ve got an IRS Commissioner who doesn’t even do his own taxes, and is not embarrassed about it. We’ve got complex deductions that nobody understands, including the government, as the Maryland nurse with the MBA found out. We’ve got a Treasury Secretary and other high appointees who apparently cheated on their taxes. And we’ve got the Democrats hell-bent on greatly increasing the power and responsibilities of the overwhelmed IRS with their health care bill.
Now, more than ever, it’s time to scrap the current income tax and put in a flat tax. Or at least we could take a big jump in that direction with a “Simplified Tax,” as discussed in a new National Academies report. Get rid of all almost all deductions, exemptions, and credits and drop individual rates to 10 and 25 percent. While we’re at it, let’s drop the federal corporate rate to 25 percent or less.
For more on the two-rate tax idea, see my Options for Tax Reform and Rep. Paul Ryan’s American Roadmap.
Private Sector Guts and Growth
The Wall Street Journal has an article today for people who think that we need government to thrust itself into the economy because major projects, like energy and technology projects, are too big or risky for private businesses. The article focuses on Chevron’s offshore oil development:
Chevron is leasing the Clear Leader, which floats in 4,300 feet of water in the Gulf of Mexico, to drill for oil through nearly five miles of rock. Big Oil never wanted to be here, in 4,300 feet of water far out in the Gulf of Mexico, drilling through nearly five miles of rock…
It is an expensive way to look for oil. Chevron Corp. is paying nearly $500,000 a day to the owner of the Clear Leader, one of the world’s newest and most powerful drilling rigs. The new well off the coast of Louisiana will connect to a huge platform floating nearby, which cost Chevron $650 million to build. The first phase of this oil-exploration project took more than 10 years and cost $2.7 billion — with no guarantee it would pay off….
“This is technology capable of going to the moon,” says Robin West, chairman of consulting firm PFC Energy, involving “extraordinary uncertainty, immense levels of information processing, staggering amounts of capital.” …
“What has enabled us to do that is technology,” says David Rainey, BP’s head of exploration for the Gulf of Mexico. “We have been pushing the limits of seismic-imaging technology and drilling technology.”…
The push into deeper water hasn’t always been smooth sailing. Offshore projects are expensive, time-consuming and prone to failure. Chevron boasts of a 45% exploration overall success rate in recent years, a remarkable run by industry standards, but one that also means the company has spent billions on projects that haven’t panned out.”
Bravo for gutsy and aggressive American capitalism! Chevron is taking huge investment risks, making remarkable technological advances, creating jobs, and finding new energy supplies to keep our homes bright and warm.
Political leaders in Washington should be encouraging such private business activities to pull the nation out of its slump. So rather than trying to hike taxes on multinational corporations and oil companies — as the Obama administration proposed in its budget last year — policymakers ought to be cutting corporate tax rates and making other pro-investment changes in federal tax and regulatory policies.
Filed under: Government and Politics; Tax and Budget Policy
State Budgets and Employee Compensation
Today, Cato released a report on employee compensation in state and local governments. As states struggle to balance their budgets in coming months, they should look to find savings in employee compensation, which represents half of all state and local spending.
The particular issue of excessive state pensions is being probed by newspapers across the nation. Over at Reason, Nick Gillespie discusses the problem in his home state of Ohio. That state’s newspapers teamed up to pen a series of articles on government pensions, which are representative of the growing pension problems in many states.
There has been a parallel series of articles across the nation on “pay-to-play” state pension scandals. These scandals involve Wall Street firms bribing public officials to get a slice of the government’s financial business. There is pay-to-play corruption in California and pay-to-play corruption in New York and many other places.
The solution to both of these problems is the same: moving the nation’s 20 million state and local workers from defined-benefit to defined-contribution pension plans. That way, governments wouldn’t have to hold giant pools of pension investments, the benefit structure of government workers would be more transparent, and policymakers could more easily cut compensation to balance state budgets.
Filed under: Health, Welfare & Entitlements; Tax and Budget Policy
No Time for Basics
Roger Pilon touches on a crucial aspect of the most recent terrorist incident to strike the nation. Federal policymakers spend the vast majority of their time mucking around in properly state, local, and private activities, leaving them little time to spend on core federal issues such as defense and security.
There is little hard data to illustrate the point, but it needs much more public discussion. Do we want the president of the United States spending his time with briefings on Wall Street salaries and the advantages of windmill power, or on the growing Iranian nuclear threat?
For members of Congress, each new federal program has stretched thinner their ability to deal with truly national problems because their attention is diverted trying to grab a share of spending from thousands of federal programs for their districts.
Federal expansion has created an “overload” on federal decision making capability. Before 9/11, most federal policymakers ignored the increasing threat of terrorism. Even after 9/11, investigations have revealed that most members of the House and Senate intelligence committees do not bother, or do not have time, to read crucial intelligence reports. Recent expansions in federal control over health care, energy, education, and financial industries will make these problems worse.
In 1925, President Calvin Coolidge argued that the growing system of federal subsidies needed to be cut because it was “encumbering the national government beyond its wisdom to comprehend, or its ability to administer” its proper roles. Unfortunately, the problem has got much, much worse since then.
Filed under: Foreign Policy and National Security; General; Government and Politics
Will Generation T Reject the T Party?
A reporter for the Canadian Financial Post posits:
We’re largely familiar with Generation X and Generation Y. But perhaps it is time to brace for the emergence of another generation in the United States– Generation T, where T stands for tax. This group can be described as young Americans, maybe aged 16 to 30, stuck with forking over higher taxes to pay off the debt legislators built up in the years leading up to the great recession and then allowed to swell substantially in a bid to save the economy from disaster. The American members of Generation T are likely to be hit with taxes their parents were lucky enough to avoid. Among the types they will get quite acquainted with is the VAT, or value-added tax.
Whether young people become the Tax Generation is largely up to them. They voted last time in overwhelming numbers for the T party, the Democrats. They have the electoral strength to send a message in coming election cycles that they don’t want to become tax slaves, bailing out their elders for their profligate ways.
Young people need to figure out that the big government policies of both parties in recent years are particularly disastrous for them. Big governments kill job opportunities, kill new industries, kill innovation, kill dynamism, and kill growth. The young need to stand up and defend themselves against the fiscal insanity in Washington, else they will be crushed by a tidal wave of taxes never seen by any generation in American history.
Unequal Robbery Under Legislation
If this health care bill passes, we will need to change the wording on the Supreme Court facade. Out with “Equal Justice Under Law” and in with “Unequal Robbery Under Legislation.”
The legislative process is certainly ugly, but the health care bill would also impose pain and shower taxpayer-funded benefits in unequal ways in an ongoing manner. Senator Nelson, for example, apparently carved out special tax benefits for Nebraska insurance companies while effectively foisting Nebraska Medicaid costs on other states.
It’s one thing for members of Congress to support provisions that are good for their states as long as those things are also good for the nation. But today’s legislators are intent are screwing the other 49 states for selfish political advantage.
How else are we to read Nelson’s hesitation at supporting the health bill until he was apparently bought off? He seems to have been thinking, “I know this bill is bad for the broader nation, but that’s not important as long as they throw in special goodies for my state.”
Nelson and other politicians who want to use government to try and help their states should run for their state legislatures. Congress should be reserved for people willing to put aside their parochial interests and at least try to legislate with the general and common interests of 300 million Americans in mind.
Filed under: Government and Politics; Health, Welfare & Entitlements; Tax and Budget Policy
George W. Bush: Biggest Spender Since LBJ
The Congressional Budget Office has released final budget numbers for fiscal year 2009. The numbers allow us to take a last look at the Bush administration’s record on spending from a statistical point of view.
The following three charts show annual average real (or constant dollar) outlays during the tenures of recent presidents. Presidents were in office for either 4 or 8 budget years, except JFK (3 years), LBJ (5 years), Nixon (6 years), and Ford (2 years).
President George W. Bush’s last year was fiscal 2009. Outlays that year were $3.522 trillion, according to the CBO. However, $108 billion was spending for the 2009 economic stimulus package passed under President Obama. Bush was thus roughly responsible for $3.414 trillion of spending in 2009, which includes outlays for the financial bailouts enacted under his watch. (For FY2009, $154 billion for TARP and $91 billion for Fannie and Freddie).
Spending in Bush’s first year (FY2001) was $1.863 trillion, thus he presided over an 83-percent increase in overall federal spending, which includes defense, domestic, entitlements, and interest. Even without TARP and Fannie/Freddie, spending was up a huge 70 percent under Bush over eight years. By contrast, total spending under eight years of President Clinton increased just 32 percent. These are the overall increases in nominal dollars.
Now let’s look at the real annual averages. Figure 1 shows the average increase in total spending under recent presidents. Bush II was the biggest spender since LBJ. His spending increases were far larger than the three prior presidents.
Of course, presidents share spending power with Congress and it is easier for presidents to control discretionary spending than entitlement spending. Nonetheless, the results in these charts reflect the general spending approach taken by the presidents quite well. For example, Bush II was instrumental in adding the Medicare drug benefit, which by 2009 was adding more than $60 billion a year to federal spending.
Figure 2 shows total federal spending without interest payments. Presidents have the least discretionary control over interest. The biggest spenders by this measure were again LBJ and Bush II. Note that Bush’s record by this measure is worse than in Figure 1. That is because Bush lucked out with relatively low interest rates on the federal debt and relatively low amounts of federal debt because of four years of surpluses under President Clinton.
For Figure 3, I took out both interest payments and defense spending from the totals. So spending includes domestic discretionary spending and so-called entitlement spending–in other words, mainly spending on the growing federal welfare state. By this measure, Eisenhower, JFK, LBJ, and Nixon had awful records. These were the years of massive creation and expansion of federal subsidy programs for the elderly, state governments, and many other groups. By the late-1970s, the creation of new programs had slowed but existing programs continued to grow.
The 1980 election of Ronald Reagan represented a revolt against the rapidly expanding welfare state. His record shown in Figure 3 of just 1 percent real spending growth over eight years was impressive, at least relative to the other presidents of the last half century.
What about Bush II? Figure 3 shows that he was the biggest domestic spender since Nixon. He set the stage for the explosive spending growth we are seeing under President Obama. Big spending was a key cause of Bush’s failure as president both economically and politically, and it is proving just as damaging and unpopular under President Obama.
Filed under: Health, Welfare & Entitlements; Tax and Budget Policy
Tax Hike Commission
The Senate Homeland Security and Government Affairs Committee is holding hearings today focused on Senator Kent Conrad (D-ND) and Judd Gregg’s (R-NH) idea to set up a special Task Force to draft a deficit-reduction plan. The plan would get fast-tracked through Congress for a vote and “everything would be on the table.”
For taxpayers, this idea creates the threat of large tax increases on top of all the other tax increases being discussed in Congress. While the senators supporting a Task Force express valid concerns about the government’s exploding debt, the plan could launch a drive to impose a European-style value-added tax in America.
In theory, such a Task Force could come up with some meaty and long-overdue cuts to the federal budget. But nine of the senators co-sponsoring the Conrad-Gregg Task Force, including Conrad, voted in favor of the massive spending bill passed by the Senate on Sunday, which increased appropriations by 10 percent in a single year.
In calling for deficit reduction, Senator Conrad says that “it is no longer enough for Congress to simply talk about reform; it is time for action and leadership.” But Senator Conrad certainly hasn’t shown reform leadership on farm subsidies. So until he and his colleagues start restraining their own spending appetites, it’s safe to assume that ”everything on the table” really just means a sneaky, under-the-table tax increase.
Perceptions of Government Pay
A new poll by Rasmussen finds that the general public has an accurate assessment of government worker pay.
Compared to the average government worker, most Americans think they work harder, have less job security and make less money.
In fact, 59% of Americans say the average government worker earns more annually than the average taxpayer, according to the latest Rasmussen Reports national telephone survey. Just 15% don’t believe that to be true, while another 26% are not sure.
Among those who have close friends or relatives who work for the government, the belief is even stronger: 61% say the average government worker earns more than the average taxpayer.
Feeding that belief is the finding that 51% of all adults think government workers are paid too much. Only 10% say they are paid too little, while 27% say their pay is about right.
Bureau of Labor Statistics data indeed shows that government workers work fewer hours in a year and have much higher job security than private sector workers. And I’ve argued that they are generally overpaid, and by increasing amounts.
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