Fear of a Unified Government
What happens to federal spending when the Democrats control both Congress and the presidency?
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.