Deficit Disorder

The Bush administration wants to spend government out of existence.

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The passage on Tuesday of the $400 billion Medicare bill, within a day or so of the delivery of the $400 billion defense bill, and around the same time as the near-passage of the gargantuan, pork-laden energy bill, brought into sharp relief a surprising but undeniable feature of the Bush administration and the GOP-controlled Congress: they spend money like the Republican stereotype of Big-Government Democrats, with total disregard for fiscal responsibility.

The bipartisan Concord Coalition, which monitors federal spending, called the first six months of 2003, the “most fiscally irresponsible in recent memory.” The result is a budget deficit that looks set to soar to $500 billion at the end of 2004. And this from the famously fiscially disciplined Republicans? What gives?

After 9/11, the GOP told the American people to expect higher spending on homeland defense. And, according, to the conservative Heritage Foundation, federal spending has grown 16 percent since 2001. In 2003, federal spending topped $20,000 per household for the first time since WWII (adjusted for inflation and put in 2003 dollars).
But Heritage also points out that over half the new spending is unrelated to defense and the 9/11 attacks. Brian M. Riedl writes:

“From 2001 through 2003, the federal budget expanded by $296 billion. New defense spending accounted for $100 billion of that amount, and other 9/11-induced spending on homeland security, international aid, and domestic rebuilding totaled $32 billion. That leaves $164 billion in new spending completely unrelated to defense and the 9/11 attacks…these unrelated expenditures were responsible for 55 percent of all new spending.”

The budget, as a Goldman Sachs newsletter recently put it, is “out of control. New York Times itemizes:

“…these Republicans have presided over an orgy of tax cuts and benefit increases that, according to the Concord group, will not only boost this year’s projected deficit but also add as much as $800 billion to the national debt over the next 10 years. The damage will be even greater in the following decade. Among the more prominent items are $400 billion for Medicare (this page supported the new prescription drug benefit), $300 billion in tax cuts and $22 billion in new veterans’ benefits. If the energy bill had passed, which fortunately did not happen, that would have added another $23 billion to $30 billion in tax cuts, plus perhaps twice that much in newly authorized programs. And all of this comes on top of three consecutive tax cuts totaling more than $1.7 trillion over the next decade.”

The Medicare bill, though it might win Bush some electoral points with seniors, doesn’t help. Doug Bandow of the National Review writes that the GOP measure certainly won’t help with a budget crunch,and could end up costing 5 times as much as congress anticipated, or $2 trillion:

“GOP support demonstrates beyond any question (not that there really was any question) that the Republicans are merely Democrats-lite when it comes to using taxpayer monies to buy votes. The measure [medicare] being pushed by the White House and congressional leadership expands the sense of entitlement among the elderly, further mortgages the future of young workers, and, if approved, will cost far, far more than the $395 billion estimated by the Congressional Budget Office.

Congressional Republicans need to decide whether they believe in limited constitutional government or not. If not, then why are they Republicans?”

Of course, much of the money spent on current measures like Medicare and the hoped-for energy bill will go to industry, not social programs. The energy bill was prepared to give billions to industry, and the recently Senate-passed medicare bill, which is estimated at costing $395 billion over the next ten years, will give at least $125 billion to the health care industry and U.S. businesses.

“The largest chunk of that assistance, according to congressional budget estimates, would be $86 billion worth of payments and tax benefits for employers, giving them a new subsidy for the health benefits that many already provide to retirees. Health maintenance organizations, hospitals and physicians also would be paid more by the government for treating the 40 million elderly and disabled people in Medicare, the estimates show.

Whether this extra money, part of a $400 billion plan to redesign the program, is warranted remains a matter of intense debate. Regardless of whether the payments are needed, the bill’s generosity to employers and major sectors of the medical industry helps explain the aggressive lobbying campaigns for the legislation by groups including the U.S. Chamber of Commerce and the American Medical Association.”

Paul Krugman, writing recently in the New York Times magazine explains that conservatives, far from ditching their deeply held goals, are actually, in a roundabout way, furthering them. There are two types of conservatives, he says: “supply-siders,” who hold that government can cut taxes without severely cutting spending, because people will spend the extra money in their pockets, thus driving economic growth; and “starve-the-beasters,” who think taxes should be cut, and spending tactically increased, in order to bloat the budget deficit and thereby limit government’s (that is, the beast’s) scope for future spending. The Bush administration, he argues, is going the starve-the beast route, and, if unchecked, could “move the nation a long way back toward the kind of limited government we had before Franklin Roosevelt. Lack of revenue … will make it possible for conservative politicians — in the name of fiscal necessity — to dismantle immensely popular government programs that would otherwise have been untouchable.”

Economists say to combat the burgeoning deficit, either taxes need to increase, spending needs to decrease, or both. What will happen to America if spending continues on its upward path and the deficit keeps getting bigger? Krugman, again:

“America a couple of decades from now will be a place in which elderly people make up a disproportionate share of the poor, as they did before Social Security. It will also be a country in which even middle-class elderly Americans are, in many cases, unable to afford expensive medical procedures or prescription drugs and in which poor Americans generally go without even basic health care. And it may well be a place in which only those who can afford expensive private schools can give their children a decent education.”


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