Not-So-Radical Republicans

Why the GOP budget revolution failed--and how it might succeed

Late last year at a budget strategy session in his office on Capitol Hill, House Budget Committee Chairman John Kasich (R-Ohio) held a briefing for a handful of small-government types on the year's upcoming budget fight. I asked Kasich why Republicans had abandoned their agenda of terminating hundreds of useless federal programs. He cupped his hands behind his head, kicked his feet up on his desk, and declared: "You just don't get it. The jig is up around here when it comes to cutting the budget."

Every jaw in the room visibly dropped. We were stunned by this devastatingly frank declaration of surrender--especially coming from Kasich, the GOP's eternal optimist and the one man on Capitol Hill during the last three years most single-mindedly dedicated to downsizing our $1.75 trillion federal enterprise. That this budget hawk had so clearly lost faith that his Republican brethren would actually cut spending was a depressing and dramatic sign that the GOP's budget revolution was over.

We shouldn't have been so shocked. Kasich had merely jolted us with the obvious truth. As the 105th Congress winds down, the budget is bulkier than ever before. This spring, the Senate Republicans approved a budget that calls for spending and tax cuts that are, in the words of a disgusted Rep. David McIntosh of Indiana, "anemic and an embarrassment." If approved, the federal budget will be some $300 billion higher than when the GOP took over the reins of Congress in January 1995. Adjusted for inflation, the four-year spending total of $7.5 trillion for 1998-2002 is more money than America spent to fight both World Wars, the Civil War, and the Revolutionary War. In fact, in today's dollars, it is more money than the U.S. government spent on everything from 1800 to 1960.

This story is eerily familiar. In his masterful 1985 critique of the Reagan administration's failure to cut the budget, The Triumph of Politics, former Office of Management and Budget Director David Stockman complained that the Reagan revolution amounted to "the clearest test of doctrine ever likely to occur in a democracy like our own" and that "the anti-statist position was utterly repudiated by the forces of the politicians--Republican and Democrat alike." Stockman glumly concluded that, by 1984, "the Reagan White House was nearly bereft of any consistent anti-spending policy principles."

And so it is in 1998 with the Republican Congress. Only a few years after the November 1994 election that swept Republicans into power on Capitol Hill, the Newt Gingrich-led budget revolution on Capitol Hill is a shambles. Fiscal conservatives have been thoroughly trounced--again. Today there is no strategy and no will power to cut anything out of the budget: not maple syrup research grants, not Jimmy Carter's home heating subsidies, not military funding to build skating rinks in Alaska, not taxpayer handouts to Fortune 500 companies. Nothing.

This duplication of the failed Reagan assault on the budget 15 years earlier raises two questions: Why won't Republicans--who continually advertise themselves as the party of smaller and smarter government--actually cut the budget? And have fiscal conservatives and libertarians been entirely naive in ever expecting them to?

The short answer to the second query is yes, and for reasons that relate to the first one. The dissipation of the Reagan "revolution" and its more recent analogue underscores basic insights of public choice economics: that government is predisposed to grow rather than shrink; that politicians, regardless of ideological bent, have strong incentives to spend tax dollars and to maintain or expand the power that spending confers; and that fundamental reform must ultimately come from deep-seated institutional change, not merely a switch in legislators. Add to that two other ingredients--a healthy economy that automatically generates enough revenue to balance the budget, thus removing the spur for serious cuts, and the fact that most congressional Republicans have never been committed to limited government--and the reasons for the GOP loss of nerve become clear.

Before exploring how and why the Republican budget revolution drifted off course so wildly and so quickly, it's only fair to acknowledge some impressive accomplishments made in the immediate aftermath of the electrifying election results of November 1994. Consider, for instance, the 1995 Freedom to Farm bill, which promises to end most crop payments by 2002. Though the law is far from perfect (and the jury is still out on whether subsidies will actually expire when the appointed time arrives), it allows farmers to produce for the market, not for the government.

Similarly, the 1996 welfare reform bill was a great victory for limited government. Despite its technical flaws and the subsequent restoration of some benefits, that bill reversed 30 years of federal welfare expansion. It changed the open-ended nature of welfare payments by requiring work and by devolving many welfare responsibilities to the states. We've already seen a 30 percent to 40 percent decline in welfare caseloads in many states. This bill was a watershed for another reason, too: For the first time in half a century, the left was forced to concede that a massive government undertaking--in this case, the $5 trillion Great Society welfare state--had failed.

But the most heralded, and improbable, fiscal accomplishment of the GOP Congress has been the balanced budget. Uncle Sam could end 1998 with a budget surplus of $50 billion or more. That will mark the first time since Lyndon Johnson's presidency that the budget has not been in the red. It's safe to say that the surplus would not have arrived had it not been for the GOP's unwavering crusade for an end to deficit spending. Arguably, Newt Gingrich's finest hour as speaker came in March 1995, when he rallied the entire Republican House caucus behind the idea of eliminating the deficit within seven years. Skeptics said it could never be done, and in a sense they were right: Congress didn't balance the budget in seven years--it did so in three. Clinton hogs the credit for the balanced budget, but the real turning point in the fiscal improvement came with the 1994 elections. When the Republicans took Congress, the baseline Clintonomics budget forecast was $200 billion deficits for as far as the eye could see.

Finally, since November 1994 Republicans have presided over a sizzling economy and a record bull market on Wall Street. When Republicans took over Congress in November 1994, the Dow Jones Industrial Average stood at 3,800. Since then, the Dow has gained more than 5,000 points--reflecting the greatest buildup of wealth in American history. Make no mistake about it: This is not a Bill Clinton but a Newt Gingrich bull market. "The markets love Republicans not for what they do, but for what they don't do," economist Arthur Laffer has hypothesized. "They don't raise taxes, they don't nationalize the health care system, they don't erect new protectionist trade barriers." Republicans can be counted on to do minimal harm, and in this global, high-tech economy, that may be good enough to keep markets chugging along.

Yet for all of these accomplishments, there is still the nagging and unavoidable reality that no matter how you measure it, the government--aside from military programs--isn't getting any smaller. Republicans have now approved four budgets (for fiscal years 1996 through 1999) that have allowed total nondefense expenditures to expand by $62 billion more than in the four years before the GOP took over Congress.

Republicans counter these depressing numbers by noting that Congress lacks unilateral authority to scale back ravenous entitlement programs--which is where most of the budget growth is. The president's signature is required to change the law on public benefits. For instance, back in 1995, during the infamous two-and-a-half-week-long shutdown of the government, Republicans had approved Medicare and Medicaid reforms that would have saved roughly $30 billion per year. Those savings were vetoed by Bill Clinton.

In the end, though, this explanation for federal budget expansions is unconvincing. If entitlements are the problem, why have congressional Republicans continued to accommodate the president's requests for new ones? Bill Clinton didn't put a gun to Republicans' head last year when they funded five new welfare, health care, and education entitlements.

Senate Budget Committee Chairman Pete Domenici of New Mexico has valiantly trumpeted the GOP budget record by announcing that total federal spending as a share of national output is falling. And indeed, federal spending is now below 21 percent of gross domestic product, down from its zenith of about 23.5 percent during the Bush-Darman years.

But there is no mystery as to what accounts for the decline: The Cold War ended. Military spending as a share of GDP is now at its lowest level since the late 1930s. The defense budget has been halved from 6 percent of GDP in 1967 to 3 percent today. Meanwhile, social spending has climbed to 18 percent of GDP, near its highest level ever. (See Chart 1.) This is the first postwar period in American history in which "peace dividend" savings have not been passed back to taxpayers through tax cuts. Instead, those defense savings have been diverted to honey bee research, Lawrence Welk museums, kiddie care, International Monetary Fund bailouts, and all of the other civilian programs crammed inside the 2,200-page budget. Of the $81 billion in new spending this year, virtually every penny will be deposited in domestic agencies.

Republicans are correct in complaining that Bill Clinton has been a tireless defender of the size and scope of government and a hindrance to every budget cut they have tried to make. For example, the latest White House budget contains 1,001 ideas for expanding government into every conceivable nook and cranny of domestic life. But in 1997, after belittling Clinton as a spendaholic, Republicans proceeded to send to the Oval Office a budget that somehow managed to spend $4 billion more than the president requested. The truth is, Sen. Phil Gramm (R-Tex.) noted last year, "Some of our Republican members routinely want to outspend Clinton."

A lesson of the Reagan years was that in order to genuinely downsize government over the long run, it's simply not enough to prune back agency budgets. They have to be pulled up by the roots, and salt needs to be poured on the soil. If any part of a program's infrastructure remains intact, it will soon grow back to its original size, if not even larger. This was a lesson Republicans said they understood back in 1995. Newt Gingrich declared shortly after his elevation to the speakership that "Republicans will prove to the American people that we can get rid of programs, not just create new ones."

In the early days of the Republican "revolution," it seemed this proclamation would be carried out. Back in April 1995 the House Republicans--inspired by the libertarian-leaning class of 72 GOP freshmen--passed a courageous budget based on the Contract with America. By Washington standards, it was an unprecedented blueprint for governmental restructuring. It slated more than 300 indefensible federal programs and three worthless cabinet agencies--Commerce, Education, and Energy--for the scrap heap. Some of these programs, such as the Legal Services Corporation, bilingual education funds, and Bill Clinton's army of Americorps "volunteers," were little more than political slush funds for left-wing constituencies. Others--like the Tennessee Valley Authority and the Rural Electrification Administration--were so antiquated that Barry Goldwater pledged to shut them down some 35 years ago when he ran for president. Most of the rest were simply hopelessly ineffectual: the Economic Development Administration, Amtrak operating funds, federal transit grants, the Appalachian Regional Commission, and maritime subsidies.

In its audacity, the original Contract with America budget was reminiscent of the first Reagan-Stockman budget back in 1981. Unsurprisingly, it met with much the same fate: When Clinton vetoed the GOP budget and the government shut down, the GOP panicked and resurrected almost all of the condemned agencies. Last year I asked House Appropriations Committee Chairman Bob Livingston of Louisiana for a list of the programs that actually have been terminated. I received an impressive-looking, four-page list of canned programs. I am happy to report that we no longer spend tax dollars on the Cattle Tick Eradication Program, the U.S. Travel and Tourism Administration, the Rural Abandoned Mine Program, and the Women's Educational Equity Act. Similarly, a House parking lot, warehouse, and barber shop have all been privatized. Good riddance to bad rubbish.

But the good news ends there. All but a handful of the 297 programs on Livingston's list had price tags of less than $1 million--not even a rounding error in our $1.8 trillion budget. The total annual savings amounts to $3 billion--a microscopic 0.017 percent of federal largess. Sure, that's $3 billion more than the Democrats ever saved. But all the big fish got away.

In fact, it's worse than that. Spending has actually risen by 1.3 percent for the 38 biggest programs once slated for termination. (See Chart 2.) For instance, the budget for Americorps was $4.3 million when the Republicans took Congress. Now it's $504 million. The Goals 2000 program--"free money" for education that some states have actually rejected because of the strings attached--has roughly tripled in size over the same period, from $231 million to $668 million. In the 1997 appropriations, funds for bilingual education rose by 35 percent, for the Appalachian Regional Commission by 6 percent (even Clinton wanted to freeze this agency), and the World Bank by one-third. Republicans even gave a 10 percent raise to the Internal Revenue Service.

The single program that has become a fiscal litmus test for the GOP is the National Endowment for the Arts. The House narrowly voted to kill the NEA last year, but it was resuscitated by GOP senators. In fact, Sen. John Chafee (R-R.I.) was so incensed by the recklessness of the young turks in the House that he proposed increasing the NEA's budget by 70 percent. The compromise struck was to cut the $100 million arts budget to $99 million. As the Heritage Foundation's Marshall Whitman quipped, "We're on a 99-year glide path to kill the NEA." Sadly, that's far more progress than we're making with most obsolete and unproductive federal programs.

For advocates of minimal government, this refinancing of programs that Republicans have railed against for 30 years is excruciating to witness. Cutting nonentitlement domestic programs is something Republicans have the power to do unilaterally. If the GOP truly wanted to end the NEA, it could cancel the funding tomorrow. The president cannot appropriate a dime of money for the NEA--or any federal nonentitlement program. Only Congress can. True, the president can whine and moan--and even shut down the government via his veto power--but he can never force Congress to spend money it doesn't want to spend. As Appropriations Committee Chairman Livingston pointed out in the GOP's headier days of 1995, "If the president vetoes a zero, he's still left with zero." During the Reagan years, Republicans argued (unconvincingly) that the president cannot downsize the government, only Congress can. Now with the parties' roles reversed, many of these same Republicans seem to be saying, "Congress cannot cut the budget; only the president can."

The Republican retreat from cutting programs related to health care, education, and the environment is somewhat understandable, given President Clinton's 1996 presidential campaign. In large part, Clinton's platform was built around promises to save such programs from any budget cutting. But Republican leaders are now reluctant to target even programs with little or no public support. What, for instance, could possibly explain the GOP's refusal to board up the last vestige of the oil crisis, Jimmy Carter's Department of Energy? We have a national energy policy that is working extremely well for consumers nowadays: It's called the free market, and it has helped deliver historically low prices on gasoline. On top of that, Hazel O'Leary, Clinton's first-term energy secretary, was a poster child for wasteful, unnecessary government spending: She used the DOE as her passport to travel first class around the globe at taxpayer expense and created a Nixon-style "enemies list" of free marketeers who want to privatize energy policy. Yet to repel the budget cutters, DOE officials staved off unwelcome GOP scrutiny by wisely forming an alliance with Western Republicans such as Rep. Dan Schaefer of Colorado and Sen. Pete Domenici of New Mexico, each of whom has national laboratories and other energy pork within his borders.

Republicans also continue to pour hundreds of millions of taxpayer dollars directly into the coffers of Planned Parenthood, the National Council of Senior Citizens, the Children's Defense Fund, the National Education Association, and trial lawyers. This is not merely a sign of cowardice--it also represents monumental political stupidity. The GOP has chosen to continue to fund the very advocacy groups that have declared a holy war against the Republican Party. Even after the unions spent an estimated $35 million against GOP candidates in 1996, Republicans continue to replenish their coffers through odious programs like the Davis-Bacon Act, an obsolete New Deal-era law which requires union wages on federal contracts, pumping tens of millions of federal dollars straight into the AFL-CIO political war chest. The Legal Services Corporation still receives $200 million a year to finance leftist legal activists dedicated to undermining the free market agenda.

Stockman used to preach about a budget reduction strategy that targeted "weak claims, not weak claimants." The corporate community in Washington that feeds at the federal trough each year has the weakest of claims but the deepest of pockets. The federal government spends nearly $70 billion a year on welfare for such impoverished companies as AT&T, General Electric, and Chevron, helping them to rig markets, stave off competition, and fatten their bottom lines. The results of such handouts are indefensible. For instance, the General Accounting Office estimates that price supports for sugar gouge consumers out of some $1.4 billion a year through higher food prices. Archer Daniels Midland, the $12.7 billion conglomerate that claims to be the "supermarket to the world," derives more than $200 million of its annual profits from the production of its government-protected high-fructose corn syrup.

Here's another weak claim: Under the late Ron Brown and now Bill Daley, the Clinton administration has converted the Commerce Department into a $5-billion-a-year, wholly owned subsidiary of the Democratic National Committee. The department is now used to shake down Fortune 500 companies for campaign contributions in exchange for millions of dollars of pork-heavy, high-tech grants and sweetheart deals with foreign governments arranged during trade missions around the globe. It is at the epicenter of the Clinton fund-raising scandals. In 1995 Brown created in his office a taxpayer-financed war room of government employees whose full-time job it was to save the department. This is a bureaucratic agency whose sole mission in life is self-preservation--the sort of dragon smaller-government Republicans should be able to slay in their sleep.

Then there's the Agriculture Department's Market Access Program, which subsidizes foreign sales by U.S. corporations. Every year American taxpayers cough up $100 million to help advertise the Pillsbury Dough Boy, Dole pineapples, Purina Puppy Chow, the dancing California raisins, and Napa Valley Cabernets on TV and radio in Europe and Asia. "Why can't Pillsbury spend its own money on advertising?" Kasich asks. Why, indeed. This program is an affront to American voters' sensibilities. But instead of terminating the program, Congress has kept the dollars flowing to the corporate looters. The only concession won by budget hawks has been a "time limit" for the aid. Ironically, while the welfare bill imposes a two-year limit on mothers receiving AFDC and food stamps, corporate welfare queens are permitted five years on the dole before they are tossed out of the safety net.

Funding parasitic corporations only reinforces the public's general suspicion that the GOP is the party of the rich, the privileged, and the corporate lobbyists. After witnessing the full funding of one corporate welfare program after another, I have to say the public's suspicions may be correct. (The Clintonite New Democrats, unfortunately, are no better.) The mercantilist policies of the Commerce and Agriculture Departments are the antithesis of the free market policies Republicans say they espouse--and, since they're extensions of a hostile Democratic administration, it's hard to understand why they continue not merely to exist but to flourish. Corporate handouts create a constituency of statist businessmen who have joined forces with politicians and bureaucrats to lobby for ever-expanding government. "If you can't push AT&T and G.E. off the dole," Silicon Valley venture capitalist Tim Draper told the Senate Government Affairs Committee in March, "how can we ever expect to get farmers, unions, artists, and seniors to give up their subsidies?"

Exactly. A handful of congressional Republicans do recognize that shrinking the corporate welfare safety net is simultaneously good policy and good politics. Sen. Sam Brownback of Kansas correctly insists that "cutting federal aid to business should be promoted as welfare reform, round two." He sensibly proposes earmarking savings from ending business subsidies to pay for a capital gains tax cut, small business tax relief, and other measures that will do far more to improve the overall competitiveness of U.S. industry. His one-man crusade against "welfare for the well-off" has been admirable, but so far he has lost to his corporate statist colleagues (who populate both parties) on nearly every vote. When I asked Newt Gingrich why the 105th Congress has not made a serious attempt to slice out corporate pork, he responded: "This really isn't one of our top priorities. And I don't like the term corporate welfare much anyway." You can lead an elephant to water, but you can't make him drink.

Similarly bizarre is the congressional Republicans' devotion to foreign aid programs. Every poll for the past 20 years has found that American voters loathe foreign aid. And for good reason: The economic evidence continues to mount that the $15 billion the U.S. government spends on the Agency for International Development, the World Bank, U.N. development programs, the IMF, and other forms of developmental assistance merely perpetuates poverty in Third World nations and underwrites corrupt regimes. As this is being written, congressional Republicans seem poised to extend an $18 billion federal line of credit to the corrupt IMF, as House Majority Leader Dick Armey fights a lonely battle against the international statists.

In March 1997, when House International Relations Committee Chairman Ben Gilman (R-N.Y.) convened a hearing on the future of foreign aid, seven of the eight witnesses testified in favor of more funding. Six of them were on the dole themselves: the American-Israeli Public Affairs Committee, the Irish National Caucus, Africare, World Vision, the American League for Exports and Security Assistance, and the nation's leading corporate welfare queen, Bechtel Corp. As Investor's Business Daily reported, "The free enterprise viewpoint on foreign aid got a better hearing when the Democrats ran Congress." In fact, Gilman's bill was so generous that a leftist organization called Interaction, a conglomeration of hundreds of groups that receive foreign-aid goodies, praised the Republicans for "passing a bipartisan bill that restores U.S. funding for international affairs." Gilman has circulated the letter to try to rally votes for his bill. This would be like Chicago's chief of police boasting of an endorsement from Al Capone.

For all intents and purposes the GOP's budget-cutting crusade ended with the 1997 budget deal--a negotiated settlement that would be more accurately described as the terms of budget surrender. With each passing day the extent of the victory for the pro-spending lobby becomes more apparent. Last summer, for instance, The Washington Post ran a front-page story aptly titled "Social Funding to Increase Significantly." "After years of assuming that a balanced budget agreement would inevitably entail deep cuts in domestic programs and catastrophic consequences for the neediest," began the story, "liberal advocacy groups and other analysts have found an extraordinary surprise: significant increases in funding for the elderly, the indigent, the college-bound, families with children, and immigrants." That covers just about everyone. To emphasize the point, the Post reported that funding for health, education, and welfare programs has soared by 29 percent since the Gingrich revolution was launched. Jubilant social welfare agency spokesmen proclaimed, "We got most everything we wanted."

The welfare industry's crown jewel in the 1997 pact was the $24 billion Kennedy-Hatch health insurance bill, which Kennedy touted as "a major step forward toward national health care." Steve Pollack, director of Families USA, a welfare-advocacy organization, praised it as "providing the most significant advance in funding for health care coverage since the Medicare and Medicaid programs were enacted 32 years ago."

Newt Gingrich and Trent Lott have been scrambling to try to convince their constituents (and themselves) that they have successfully tamed the budget. Ironically, to camouflage the torrent of new spending, Republicans have reverted back to the deceptive rhetoric of current services budgeting--a practice they lambasted when they were in the minority. The 1996 GOP platform trashed baseline budgeting as "a deceptive and reprehensible shell game." Now we have Republican leaders Pete Domenici, Newt Gingrich, and Trent Lott embracing the practice, applauding hundreds of billions of dollars of "savings" and "cuts" in a Republican budget that allows spending to grow by at least $75 billion. A shell game indeed, when the level of spending cuts promised in the Contract with America is compared with the actual level of spending. (See Chart 3.)

No single bill exemplifies the decisive rout of fiscal conservatism on Capitol Hill more than the 1998 highway bill. The first sign of trouble was the stampede of Republican House members pleading for a coveted slot on the Transportation Committee shortly after the 1996 elections. The committee ballooned to 73 members, making it the biggest spending committee in the history of Congress. The $214 billion bill, drafted by Chairman Bud Shuster (R-Pa.), represents a 40 percent, five-year increase; it's the most expensive public works bill in American history. The standing joke in Washington this spring was that because of his penchant for laying cement, no blade of grass in America is safe while Bud Shuster runs the committee.

The bill contains 1,467 white elephant transportation "demonstration" projects for bicycle paths, hiking trails, bus museums, parking garages, subway systems to nowhere, and university research. That's three slabs of bacon for every congressional district and 10 times more pork projects than in the Democrat-drafted highway bill Ronald Reagan vetoed a decade ago. It is $30 billion above the already generous spending caps set during the 1997 budget deal. Even President Clinton lashed out at the bill, rightly calling it "fiscally irresponsible."

In the Senate there was not a peep of protest against this fiscal travesty. The bill passed 96-4, with the only nay votes coming from the delegations of Wisconsin and Pennsylvania--which complained that their states were getting shortchanged in the spending sweepstakes. In the House, only a third of Republicans voted no. One who did, Rep. Chris Shays of Connecticut, a moderate, declared shortly before the House vote, "This bill is a dramatic sign that the Republican revolution is dead."

So what lessons should voters learn from the collapse of the GOP's budget-cutting agenda? The parallels with the disappointing Reagan budget revolution are striking. David Stockman concluded in The Triumph of Politics that the heretics in the 1980s were not Tip O'Neill, Ted Kennedy, and other liberals hell-bent on preserving the status quo. Rather, the real problem lay in Reagan Cabinet members who would wear their Adam Smith ties to meetings, only to plead for ever-increasing funding for their own agencies. Congressional Republicans during the Reagan years also quickly abandoned the idea of cutting the budget in favor of power, prestige, and thick slabs of pork. In the end, writes Stockman, the Republicans could not bring themselves to say no to "Social Security [cost-of-living adjustments], corporate protectionism, safety net programs, urban aid grants, and farm price supports."

Similarly, after four years of a Republican Congress, the downsizing agenda has itself been downsized, almost to the point of completely disappearing. The conventional explanation for the GOP's fiscal retreat is that the public backlash from the failed government shutdown episode has turned the Republicans into a bunch of Milquetoasts. But the truth is that even if Republicans had won that early battle with Clinton, they would still have made a separate peace with the pro-spending lobby by now. There are simply too many James Jeffordses, John Chafees, Al D'Amatos, and Bud Shusters in the GOP to sustain a credible small-government agenda.

Indeed, the big spenders' control of the party's fiscal agenda seems distressingly secure. Liberal House Republicans are now conspiring to elevate House Appropriations Committee Chairman Bob Livingston, big spender extraordinaire and the enduring symbol of the let's-make-a-deal school of politics, to the speakership. They may well succeed. And who will be the next majority leader to lead this fiscal revolution? Bud Shuster?

But Republicans have an even bigger problem confronting them. For 30 years they have dedicated themselves to the mantra of a balanced budget. To their credit, that objective has been achieved--though mainly through record tax increases and military downsizing. Without the demon of the deficit, Senate Republicans are content to preserve the status quo--and even to brag about spending surplus funds on new social programs. In the wake of the balanced budget accord, few are comfortable articulating the case for smaller government. And you can count on one hand the number of Senate Republicans who are comfortable voting for it. The 1998 Senate budget resolution passed in April was nothing but a resounding affirmation of the status quo. It specified zero program terminations.

There is a silver lining, though, in the House, where a few Republican budget hawks remain. They are mostly from the freshman class of the 104th Congress and include stalwarts such as Mark Neumann of Wisconsin, Mark Souder and David McIntosh of Indiana, Mark Sanford of South Carolina, J.D. Hayworth and Matt Salmon of Arizona, and Steve Largent of Oklahoma. There are perhaps 50 or so Republicans who have remained true to principle and have rejected the spendthrift mentality of the past two years. Within the GOP caucus, they are treated like tobacco lobbyists at a health care convention.

Given that, it's tempting to conclude that cutting the colossal federal empire in Washington is futile. That was David Stockman's disgruntled conclusion in 1985. It's also how many analysts are interpreting the 105th Congress's performance. Applying the public choice analysis of the late Mancur Olson, Jonathan Rauch, author of Demosclerosis: The Silent Killer of American Government, believes that the continued growth of government under a GOP Congress means that "conservative visionaries who still hope to radically reduce Washington's reach are today just as pie-eyed as liberal visionaries who hope to turn America into Sweden." Political writer E.J. Dionne of The Washington Post says politicians are simply "delivering all the government that the voters want." The Weekly Standard's Bill Kristol and David Brooks write of a need for the GOP to stop being "unfriendly to big government." Instead they believe that the American people long for Uncle Sam to serve as a vehicle for achieving "national greatness." Even though they're coming from different perspectives--Olson/Rauch as political economists, Dionne and Kristol/Brooks as ideological advocates--all agree that cutting the government is hopeless.

The double lesson of the Reagan and Gingrich eras is that Republicans are perhaps a necessary but not a sufficient condition for achieving smaller government. After 12 years of GOP presidents and four years of a GOP Congress, all of the public choice barriers to cutting government that existed in 1980 are still present today. The political process is still severely biased in favor of spending, rather than cutting. This suggests that the most promising political strategy for cutting government is to devote money and energy to institutional reforms--to actually change the rules of the game, rather than simply trying to outplay the other side.

Foremost among these rule changes is term limits. When Republicans took over Congress in 1995, the new majority leader, Dick Armey, one of the few dedicated limited-government conservatives in Congress, declared that if Republicans did their jobs, "maybe the public's desire for term limits will subside." Just the opposite has transpired: The 104th and 105th Congresses have been shining monuments to the need for limiting terms. My colleague at the Cato Institute Aaron Steelman has found that the propensity to tax, spend, and regulate rises in an almost linear fashion with length of time in office. In fact, that's particularly true for Republicans, since Democrats usually come to Washington already inclined to spend other people's money. For Republicans, taxing and spending are learned behaviors.

Tax limitation measures are also imperative. Here the experiences of the states are instructive. The Western states--such as Arizona, Colorado, Montana, and Nevada--that have enacted supermajority or voter approval requirements for tax increases have stopped them dead in their tracks. Other states have constitutional constraints on the rate of spending growth--normally tied to population growth plus inflation--that require tax rebates instead of spending hikes during boom periods. A two-thirds supermajority requirement for new taxes would have prevented the last five federal tax increases--including the Bush and Clinton hikes. At the end of April, the House voted down a constitutional amendment requiring a two-thirds majority, 238-186, primarily along party lines.

Fiscal conservatives should have by now been jolted from their 30-year fantasy that if only Republicans controlled Congress, government would become smaller, less consequential, and less intrusive. Those (including me) who once upon time believed this fairy tale should have known better. As in the early 1980s, we have once again collided with the central reality that despite the appealing rhetoric, the GOP is not a small-government party. The Democratic cardinals on Capitol Hill have simply handed over the reins of power to a cast of Republican cardinals.

This is not to say that libertarians and fiscal conservatives should conclude that cutting the government is infeasible, as Rauch, and apparently Kristol and Brooks, have surmised. Before advocates of limited government can change the country, they must change the GOP. It's not a fantasy to imagine that someday Republicans can cut the budget and rein in the federal government; it's just that these Republicans won't do it.

When Bud Shuster was recently asked to justify all the pork spending projects in the highway bill, he cavalierly replied: "Look, congressmen aren't angels." No, they certainly are not. And the lesson of the last four years has been that they are not angels even--and in some cases especially--if they have an R next to their names.

Stephen Moore is director of fiscal policy studies at the Cato Institute.