Economics

Fear of a Unified Government

What happens to federal spending when the Democrats control both Congress and the presidency?

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When it comes to out-of-control spending, conventional wisdom says the Democrats are most likely to bust open the coffers. That's why many fear an increased Democratic majority in Congress topped by a Democratic president. And we should be afraid. Democrats are indeed big spenders. Second only to the Republicans.

If limited government is the goal, history tells us we should root for Democratic presidents and Republican Congresses. And regardless of party, Texans should be kept far away from the White House.

Federal budgets consist of two main categories: mandatory and discretionary spending. Mandatory outlays consist mostly of entitlement programs such as Social Security, Medicare, and Medicaid. These are funded by permanent law rather than appropriations, which means they are outside the annual budgetary review by the president and Congress.

Discretionary spending consists mostly of military spending and nonentitlement domestic programs, including farm subsidies, education, federal law enforcement, and space exploration. The growth in such spending, because it theoretically could be zeroed out each year, is a good measure of fiscal responsibility.

During the last 48 years, the six largest annual percentage increases in real discretionary outlays were split between two presidents, Lyndon Johnson and George W. Bush (see Figure 1). Big spending, it would seem, is more a Texas phenomenon than a partisan one. While LBJ and GWB increased discretionary spending by between 6.6 percent and 14.8 percent in their most profligate years, the average annual increase during the last 48 years has been a much more modest 1.7 percent.

An even better indicator is total growth in the federal budget during a president's tenure. Figure 2 shows how many total dollars per term (adjusted for inflation) each modern full-term president added to his predecessor's final budget (or to his own, if he was re-elected). By this measure, George W. Bush outspent everyone. During his first term, he added $345 billion to Clinton's last budget; in his second he has tacked on $287 billion more so far.

Bush's apologists claim he had no choice but to expand military spending to combat terrorism at home and abroad. But he also increased both nondefense spending and mandatory programs enormously. And it's Republicans, not Democrats, who are almost entirely to blame for these expansions, because during the first half of 2001 and all of the 2003-07 period the GOP maintained full control of both the White House and Congress. With Washington unified, the purported party of limited government increased total spending by more than 20 percent, an average of 5 percent a year.

How does that compare with unified government under Democrats? During the one party Carter administration, the average growth rate was slightly lower, at 4.7 percent. Bill Clinton's first two budgets, which were approved by a Democrat-controlled Congress, grew at a comparatively paltry 1.4 percent. Unsurprisingly, government spending increased 35 percent in real terms during LBJ's presidency. Yet Bush spent more: On average he added $79 billion in total outlays each year of his presidency, compared to the $40 billion a year added by LBJ.

Ronald Reagan, that eloquent spokesman for limited government, doesn't look that great either. During his first term, the man who had said "it is my intention to curb the size and influence of the federal establishment" added roughly the same total dollar amount to the budget as big spender Jimmy Carter. And while Reagan managed to cut nonmilitary spending by an impressive 10 percent, during that same period he increased total spending by 23 percent.

Many maintain that looking at total spending provides a distorted measure of Reagan's record, arguing that his 41 percent increase in Pentagon spending helped America win the Cold War. That may be true. Yet I can't think of a legitimate reason why we should eliminate defense from the category of government expenditure. After all, it's a department that—like all bureaucracies, and arguably more so—suffers from waste, fraud, abuse, and poor oversight.

Richard Nixon is interesting too. Even though he had no desire to repeal the Great Society, and presided over expansions of government power, he added only $44 billion to the budget during his first term—a 5.3 percent real increase. That's mainly because he slashed military spending by a whopping 30.2 percent.

And Clinton? During his first term, he increased spending by just $68 billion. That's less than Reagan and both Bushes. Does the GOP takeover of Congress in 1994 explain his record on spending and the balanced budget of 1998? Not necessarily.

First, spending wasn't out of control during Clinton's first two years. He increased total outlays by less than 3 percent in two years—a remarkably small number compared to the 8 percent increase in 2003-04, the first two years of Bush's one-party rule.

Second, the real causes of the budget surplus were reductions in military spending and higher tax receipts. With the exception of fiscal year 1996, nonmilitary spending under Republican-led Congresses has increased every year during the last half-century. And whatever fiscal discipline the GOP Congress brought to the 1990s, it was short-lived: In Clinton's second term, additional spending doubled to $136 billion.

So no matter who occupies the White House next January, the U.S. government will probably become larger and more expensive. But history suggests that it's likely to grow faster with a Republican president.

What about Congress? In 2004, looking at real annual government spending per capita since 1947, Liberty's R.W. Bradford concluded that while spending grows faster if Republicans control the White House, it also grows faster if Democrats control Congress. Furthermore, some empirical studies, such as David R. Mayhew's 2005 book Divided We Govern, suggest that when one party controls the White House and the other controls at least one house of Congress, the result is slightly slower spending growth, increased oversight, and longer-lasting reforms.

Based on these findings, we can rate the different Congress/White House combinations from mediocre to worst: 1) Democratic White House and Republican Congress, 2) Republican White House and Democratic Congress, and 3) unified Republican or Democratic rule.

Only bad combinations are available in November, as Congress will almost certainly remain in the hands of the Democrats. If McCain wins the race, we won't be getting our best option—and in two years we could get a unified Republican government, which would be awful. The least bad option, as far as spending is concerned, is for Obama to win. While unified government is terrible, and I suspect Obama will be atrocious, Democratic control of the legislative and executive branches increases the chance that Republicans take over Congress in two years. Then we can all live happily in a mediocre world.

Contributing Editor Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University.

NEXT: Sarah Palin on the First Amendment

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  1. Wow, now that is a scary thought isnt it? Wow, can you imagine!

    jiff
    http://www.anonymity.cz.tc

  2. Illinois has a unified Democratic government and they haven’t done shit (not that I’m complaining).

  3. It is an axiom of all Republican politicians that military spending makes us all safer. Maybe it’s not true.

    In order to “Kill dangerous terrorists” we routinely kill scores of innocent women and children, thus turning their surviving young male relatives into terrorists. If the Dems’ were to cut way back on military spending, even if there are increases in domestic programs, the total could be lower.

  4. 1) Excellent article.

    2) WLC makes a good point. There are shitty state governments with single-party rule and divided government. For instance, hasn’t the NY legislature been divided most of the time for decades?

  5. Caption Contest!

    “I swear to you that we are not after your guns. You just have to trust us on this. Sort of like the bailout.”

  6. And regardless of party, Texans should be kept far away from the White House

    Amen, sister!

  7. I’ve been tracking these numbers for years Bottom line is that Dems in the White House are better at “limiting” government notwithstanding the erroneous public perception. But the bad news, neither major party has shown any incentive to limit, let alone shrink government whatsoever.

  8. I notice that the primary criteria is discretionary spending. Frankly, discretionary spending is far less concerning to me than non-discretionary spending, which under Obama seems likely to skyrocket with new entitlements like universal preschool, universal college and universal health insurance.

    While learning from historical precedents is important, frankly without context this is rather meaningless. First, Clinton didn’t increase spending because his healthcare plan fell flat on its face. Had he succeeded, I doubt the numbers would have been so nice. Second, McCain has always been a budget hawk and I don’t see any signs of that really changing beyond the bailout (his biggest mistake in my opinion). He also proposed a spending freeze his first year. More importantly, he’ll use the veto pen, unlike Bush.

    Also, we are now amidst a huge recession, which leaves question marks on future discretionary spending. Obama does seem to be proposing lots of new discretionary spending to fight the recession, “create jobs”, etc. Also, Clinton and Carter were centrists to the right of LBJ. Obama is far to the left of LBJ.

    Frankly, while this study is interesting as historical example, I don’t know if it actually says anything in context of different candidates and a different political climate.

  9. But guys, unity is a good thing! Steve Chapman said so!

  10. Bush is from Connecticut, LBJ was from Texas. Sure Texas is about everything being big, so why not budgets. The tie-in of Bush and LBJ is cute but inaccurate. Each was creepy in his own special way.

  11. You’re comparing tropical fruits. You admit the peace dividend Clinton inherited without acknowledging it. Also remember that Democrats in 1992 were to the right of Republicans today, in general.

  12. Won’t someone play Burt Bacharach at the inaugural?

  13. 2004: Republican Congress, Republican Executive, Republican Judiciary

    2008: Democrat Congress, Democrat Executive, Democrat Judiciary (on its way)

    Things can change pretty quickly. Dontcha think?

    Meaning: silver prices likely to fall! Invest in Osmium!

  14. I agree that a Democratic president and a Republican congress is best; the Republicans are war hawks and whimsical spenders so putting them in executive power is bad… but we still needs some balance so things don’t get too messed up.

    My only concern is that Obama is really liberal, and America still doesn’t have national health care, and there’s a huge-ass economic downturn right now. So unless Republicans can win back Congress in two years (yeah right), we’re fucked no matter what. Dammit!

  15. What’s funny is the Democratic shills who were praising divided government to the skies in 2006 and warning against it now. Why not just be honest?

  16. Also remember that Democrats in 1992 were to the right of Republicans today, in general.

    what

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  18. I can think of one Texan that would do great in the White House.

  19. Citing: “Democrats are indeed big spenders. Second only to the Republicans.”
    How about Republicans are big spenders with no results after 8 years under your watch in Senate, Congress, and the White House? Why this bailout? Need to take you to face the public anger. But you have no Reason!!!

  20. I can think of one Texan that would do great in the White House.

    Yes, but he is the exception, is he not.

    However, being from Texas, I have to agree with the sentiment, Mr. Paul notwithstanding.

    While President Palin still scares me the most, think of these abomonations:

    President John Cornyn
    President Rick Perry
    President Kay Bailey Hutchison
    President David Dewhurst
    President Joe Barton
    President Sheila Jackson-Lee
    Presdient Lloyd Doggett
    President Tom Delay
    President Mark Cuban
    President Don Henley
    President Dan Rather
    President Matthew McConaughey
    President Gibby Haynes
    and the scariest of all….

    President Jerry Jones.

    I think I could handle a Willie Nelson, Billy Gibbons, or Tommy Lee Jones presidency, though.

    Oh, and Natalie Maines will be eligible for the Presidency next year.

  21. @Mike E.:

    You forgot one:

    President Matt Welch

  22. Why not just be honest?

    You’re not allowed to use “honest” and “Democrat” in the same comment. It’s unseemly.

  23. This is like comparing getting hit with a baseball bat 7 times or 8 times. The correct answer is that you would rather be hit with a baseball bat zero times. (I hope).

    This is a poster child for the type of simplistic, pointless libertarian-lite analysis that has sent real libertarians down the wrong road for years.

    The fact is that in the past and in the future ALL of the proposed balance of power configurations produce dreadful results as long as they include Democrats and Republicans. They are both profligate spenders, big government statists who think they can spend your money better than you can.

    The difference in results can be explained almost entirely by factors other than which party is more fiscally responsible. Remove the drawdown of US troops after the Vietnam war and the fall of the Berlin wall and do the records still look different? Probably not. Take away the Boskin commission’s manipulation of the official inflation statistics and giant tech bubble – do you still have a “balanced” budget? And is a massive balanced budget better than a dramatically smaller budget (balanced or not)? Clinton and Carter came into office with reduced military expeditures that they had no hand in causing. And Reagan, despite his rhetoric, increased the amount of money the government spent and didn’t even reduce the total of amount of taxes the government took from the populus at all. Both Bushes of course were spending disasters. As were Kennedy/Johnson and Nixon.

    The fact is that most government spending and taxing automatically adjusts with the economy – taxes go up and spending goes down in good times, the opposite in bad. The actual discretion that the Congress and President has is small. But make no mistake, the end result of this is that the government grows every year regardless. Reagan and Newt Gingrich said this over and over again in defense against accusations of “baby starving” by the Democrats. They only wanted to slow the rate of growth of government.

    No configuration of Republicrats and Demoplicans will lead to a smaller government. Period.

  24. You forgot one:

    President Matt Welch

    Uh, is he a Texan?

  25. The difference between defense and non-defense spending is that defense spending is:

    1) A legitimate government function under minarchist theory; and

    2) Made specifically the responsibility of the Federal Government under the U.S. Constitution.

    At the same time, you make no case whatsoever for excluding entitlements; expenditures for them are just as much under the control of legislation as discretionary spending. At the very least, changes in entitlement programs need to be scored.

  26. I can think of one Texan that would do great in the White House.

    Yes, but he is the exception, is he not.

    Sorry if I’m being a little slow, but guys are talking about Kinky Friedman, right?

  27. There is no mandatory spending. Congress could change the law at any time and restore Constitutional government, if enough of them ever wanted to.

  28. Yes, defense spending is specifically authorized by the Constitution, with one important and ignored caveat — no appropriation for the army can be for over two years. The Constitutional idea was to fund and equip an army only under extreme circumstances, when war was imminent.

  29. Craig,
    We need you help to fight off the giant guinea pigs that are destroying the world!

  30. And Reagan…didn’t even reduce the total of amount of taxes the government took from the populus at all.

    That was kind of the point. He increased the tax revenues collected while decreasing the tax rates imposed on the people. This shows pretty definitively that the private sector can allocate capital better than the government; i.e. when people/businesses are allowed to keep more of their money they can make money with it and can create more jobs. Thus with more people making more money tax revenues collected increase.

  31. Coupla ugly button-nosed fools.

  32. “That was kind of the point. He increased the tax revenues collected while decreasing the tax rates imposed on the people. This shows pretty definitively that the private sector can allocate capital better than the government; i.e. when people/businesses are allowed to keep more of their money they can make money with it and can create more jobs. Thus with more people making more money tax revenues collected increase.”

    Again, more tax revenues equals bigger government, at what tax rate the government gets the money matters some around the edges, but the bottom line is that taxes taken out of the productive economy and spent by politiicans is a negative for the wealth of the country. More taxes – no matter how they are collected – is worse than less taxes. And that doesn’t even start to talk about all the debt incurred so that the government could spend even more.

    Here’s an excellent analysis done in 1988:

    http://mises.org/freemarket_detail.aspx?control=488

    Despite all of his so-called tax cutting and de-regulating, at the end of his second term the federal government spent 28.7% of the national income – up a full 1% from Carter’s last budget. The federal register also grew under Reagan, despite his reputation as a champion of de-reulation (but not un-regulation) leaving us with a more regulated economy (including Reagan’s sad protectionist record), higher taxes and higher spending.

    In conclusion – both parties suck for free-market, laissez-faire, small government libertarians.

  33. The fly in the ointment of course being that Obama is a Far Left Democrat, and many/most of the Congressional leadership will be Far Left Democrats- where will be any inclination to curtails spending and/or the size and scope of government?

  34. Reducing spending means reducing government power. Neither wing of the Ruling Party has any desire whatsoever to reduce the power of the federal government. The only difference between them is the style of the blather that they use to lie to us about their intentions.

    -jcr

  35. Dream on, Veronique. One of the very first priorities of the new Dem congress and administration will be the passage of electoral and and voter registration legislation that will guarantee Democratic control of both forever. Our elections will become the equivalent of those in the old USSR.

    America as we’ve known it will be finished, and very quickly.

  36. “The only thing worse than Republicans and Democrats is when they start working together” – Lewis Black

  37. BAD news for PA and WV from Associated Press: Obama Tells SF Chronicle He Will Bankrupt Coal Industry By P.J. Gladnick November 2, 2008 – 07:26 ET Barack Obama actually flat out told the San Francisco Chronicle (SF Gate) that he was willing to see the coal industry go bankrupt in a January 17, 2008 interview. The result? Nothing. This audio interview vanished. Here is the transcript of Obama’s statement about bankrupting the coal industry: “Let me sort of describe my overall policy. What I’ve said is that we would put a cap and trade system in place that is as aggressive, if not more aggressive, than anybody else’s out there. I was the first to call for a 100% auction on the cap and trade system, which means that every unit of carbon or greenhouse gases emitted would be charged to the polluter. That will create a market in which whatever technologies are out there that are being presented, whatever power plants that are being built, that they would have to meet the rigors of that market and the ratcheted down caps that are being placed, imposed every year. So if somebody wants to build a coal-powered plant, they can; it’s just that it will bankrupt them because they’re going to be charged a huge sum for all that greenhouse gas that’s being emitted. Story Continues Below Ad ? That will also generate billions of dollars that we can invest in solar, wind, biodiesel and other alternative energy approaches. The only thing I’ve said with respect to coal, I haven’t been some coal booster. What I have said is that for us to take coal off the table as a (sic) ideological matter as opposed to saying if technology allows us to use coal in a clean way, we should pursue it. So if somebody wants to build a coal-powered plant, they can. It’s just that it will bankrupt them.”

  38. Congratulations on another thorough, sophisticated article – completely devoid of historical or political context.

    Good job.

  39. It seems that a good measure to look at is spending as a proportion of GDP. It seems that from the perspective of evaluating the growth of government influence (a much more important issue than merely spending), I want to know how large a proprotion of economic activity government conrols.

  40. This is the worst article I’ve ever seen from Reason. And I’ve read a LOT of your articles.

    What the hell is wrong with you? If McCain wins we will be getting our best option IN THIS CASE. Do you not understand that “the least bad” IS (by definition?) the BEST OPTION!? What a half-wit.

    Please, do tell, which is worse “atrocious” or “awful”? Oh that’s right, this entire article is about an abstract thing called “spending” with ZERO regard for the substance or results of such spending… AND entitlements weren’t discussed.

    This is just amazing, yet understandable. You write an article promoting the acceptance of the “bad” now so you can get a “less bad” result later. Who except for a bunch of people that no one has listened to for years (as they should have!) would dream up some scheme of being able to control public opinion two years in advance just for the “least bad” option?? Articles like this are why no one listens to you. There is nothing to hear! Vote Obama now, so we can have republicans back in the house sooner? Should we all be in awe of your brilliant pragmatic suggestion??

    Have fun in obscurity.

  41. yay! More Kadetism from the staff at reason. You’d think the “libertarian” writers would be a bit more weary of an openly spread-the-wealth socialist with a penchant for using government officials(Barack Obama Truth Squads) to silence critics. And I’d expect to hear digs at Texas comming from fabian european socialites, but not from a libertarian working for the American Enterprise Institute. This magazine used to be great, but now it sounds like the Huffington Post with the occasional half-hearted apologetic for capitalism. This is worse than lewrockwell.com

  42. “Congratulations on another thorough, sophisticated article – completely devoid of historical or political context.”

    Mlr, you’ve captured everything wrong with all of Reason’s articles for the past three years in just one sentence.

  43. Kadetism, eh?? Nice reference. Maybe the Reason contributors should read some Solzhenitsyn.

    Oh right right, that’s TOTALLY different!!

  44. Listen to the Alex Jones radio interview with Webster Tarpley, author of Obama A Postmodern Coup. It is a free MP3 download at
    http://drop.io/Summerbird It is currently the 9th audio file down from the top of the page.
    Webster delineates the horrors of a unified government.

  45. This is really the bad thing. it doesn’t matter much who wins the presidency, we’ll still have people like Pelosi and Frank in charge, nationalizing entire industries, deliberately destroying the economy in the name of environmental reform, housing reform, etc. Even Bill Clinton complained about them a few weeks ago and their refusal to help reform Fannie/Freddie back in the 90s. In addition despite arguing against the Patriot act initially, when it came up for a revote the Democrats were first in line to expand it to the war on drugs.

    With the Republicans we get higher inflation and more spending and generating money out of thin air.

    I don’t know which is worse, but i think my freedoms would be better protected if Pelosi, Schumer, Durbin, Biden, Frank and the others were gone.

  46. The main reason that I consider Regan’s Military spending increases a part of limited government is because it is a real power given to the federal government by the constitution. So I consider cutting spending on unconstitutional programs while increasing spending on constitutional ones as a benefit.

    Now the War on Drugs……

  47. Well look at what the reasonoids’ socialist hero is proposing now:

    http://www.youtube.com/watch?v=gwaAVJITx1Y

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  49. The biggest increase in government spending, an increase we still don’t know the full size of, is the mandatory entitlement programs begun under FDR. A unified Democratic government means freedom will contract, government will expand, and the existence of the Republic will be endangered. The Republicans have serious deficiencies, but at least we have a shot at influencing them to make liberty minded choices. With the Democrats its a steady march into the abyss.

  50. In debates, whenever someone brings up the fact that a Barack Obama presidency would be Stalin 2: Electric Boogaloo. The leftist always responds, “Oh yeah, Bush has (been a big spender/harmed civil liberties[cuz listening in on terrorists talk to each other in Pakistan is the same thing as using government officials to punish critics])” That is a lot like saying, “let’s go for the HIGH SCORE!” But why the hell is a supposed libertarian making this argument. This Veronique does not think like a libertarian.

  51. “The main reason that I consider Regan’s Military spending increases a part of limited government is because it is a real power given to the federal government by the constitution. So I consider cutting spending on unconstitutional programs while increasing spending on constitutional ones as a benefit.”

    What’s a rational argument doing here on Reason. It’s so rare that I run into a fellow sensible libertarian instead of the usual rothbardian isolationist.

  52. There’s no such thing as “permamnent law.” Social security and Medicare were created by and voted through by elected officials, and the reverse happens when the citizens insist.

  53. “The American Republic will endure until the day Congress discovers that it can bribe the public with the public’s money.”
    – Alexis de Tocqueville

    We are on our way.

  54. It’s hard to take seriously any article that refers to a Clinton surplus. It’s mythical; it only exists if you assume that the Social Security revenues that put the budget in the black never have to be paid back.

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