For instance, by cutting marginal income tax rates, an administration can substantially reduce the number of people unemployed and hence reduce entitlement payments. Also, the president can change the underlying laws that define how and to whom the money is distributed. President Reagan's first budget plan promised to "overhaul the nation's overgrown $350 billion entitlements system"; he also proposed numerous spending reductions to Medicare and Medicaid and was able to make some modest reforms to slow program growth rates. Those are some of the reasons why the total increase in mandatory spending during Reagan's first five years was a relatively paltry 12.4 percent. In 1996, President Clinton signed off on vigorous welfare reforms. Chief among them were the strong incentives for welfare recipient to get jobs, which benefited all Americans in the form of lower spending on welfare. The economic boom of the Clinton years—induced in part by large capital gains tax cuts—also worked to decrease entitlement spending.
President Bush seems intent on following the LBJ model by making entitlement spending even more overgrown. In a fiscally reckless act, Congress and President Bush enacted the $550 billion (over 10 years) drug bill even though the budget is deep into deficit and Medicare already has a huge financing shortfall. Not only is the new drug program the biggest expansion in Medicare since its inception, it's virtually certain that the $550 billion price tag is a low-ball estimate. Despite the massive cost, some on Capitol Hill now want to expand these entitlements in the name of Katrina victims.
To date, the Bush administration has a disjointed, two-track budget policy. It has favored letting Americans keep more of their money via tax cuts while steadily building up the welfare state via unrestrained spending. Over time, that that strategy can't work. As Milton Friedman and others have long argued, the size of government is found in its total spending and, ultimately, spending is a taxpayer issue. Higher spending and resulting deficits create a constant threat of higher taxes. It's no surprise that not just Democrats but even moderate Republicans are now arguing that Bush's recent tax cuts be allowed to expire.
To be sure, Congress shares the blame for runaway spending in the past five years. Yet Bush has not vetoed a single spending bill during his tenure in office. To the contrary, he has signed every bill crossing his desk, including huge education, farm subsidy, and transportation bills. He has made only the most feeble efforts to rein in pork-barrel spending or offset new programs with cuts in existing ones.
What makes this all the more frustrating is that Bush, unlike Reagan and Clinton, faces a Congress that is controlled by his own party, which claims to be dedicated to smaller, more efficient government. Yet Bush has shown no leadership on spending reform—and Republicans have rebuffed even the mildest criticisms of their spendthrift ways. It seems incontestable that we should conclude that the country's purse is worse off when Republicans are in power.
[Editor's Note: The original version of this story contained an incorrect estimate of Bush 43's real discretionary spending in the defense and non-defense categories. The original version stated that Bush had increased total real discretionary spending over five years by 35.2 percent, including a 30.2 percent increase in non-defense spending and a 30.8 percent increase in defense spending. The correct estimated figures are 35.8 percent for total real discretionary spending, 27.9 percent for non-defense spending, and 44.5 percent for defense spending.]
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