Sunday, March 13, 2005

The New Republican Party of Big Government: Bush Republicanism and the Collapse of Republican Principles

There's more old drunkards than old doctors.--Poor Richard

Bryan Jones:
One of my favorite George Bush malapropisms is from the 2000 election campaign: "They have miscalculated me as a leader." He meant, of course, that people had miscalculated if they thought he was not a leader.

The president's difficulties with off-the-cuff speech have led to all sorts of assumptions about his intellectual confusion and worse.

But there is nothing confused about this president's agenda. At this point in his presidency, he has fielded the most focused agenda in modern times, to great effect. His success rate in major policy activities is nothing less than astounding. No wonder he has never vetoed a bill!

Ironically, though, this tightly focused and highly successful agenda has led to an incoherent program and with no understandable governing philosophy — for both the president and his party. The legacy of Bush is a modern Republican Party with no anchor, no clear goals, rushing forward doing things, accomplishing much, but putting into place policies that do not add up to a sensible public philosophy to sustain the future.

Such inconsistency leads inevitably to irresponsible public finance. And that is how the Republican Party came to forsake its heritage of small government and fiscal prudence. It has traded a sound and guiding set of principles for a set of confused and self-contradictory assertions that are nevertheless asserted with strong conviction. The inevitable result is poor government.

Ad hoc reasons are generated to cover policy initiatives instead of initiatives being grounded in sound reasoning. Rather than an underlying rationale of limited government, or of Christian values, or of neoconservative power, one gets a set of disconnected and one-time theories to cover what is being done.

For tax cuts, we get "it's the people's money" and "we need an economic stimulus," and "if we 'starve the beast' by limiting its revenue flows, then government will shrink." For the invasion of Iraq, we get "weapons of mass destruction" to "ridding the world of a dictator" to "promoting democracy throughout the world."

Unfortunately, the collective result of a focused, successful agenda and an incoherent public philosophy is government by inconsistency.

This incoherence is brand new. For most of the period since the Great Depression, the Republican Party articulated the case for limited government and fiscal responsibility.

Even when Republicans expanded government — as they did in the Eisenhower years with a commitment to science, space and transportation — they stood rock solid for prudent budgeting. If the government took it on, the taxpayers would have to pony up the means.

The first major change came with the notion, adopted by President Ronald Reagan, that tax cuts would stimulate enough revenue that government would not need to control spending. Reagan tried mightily to get Congress to limit domestic spending (while he pushed large new military initiatives) at the same time taxes were cut.

When the supply-side endeavor failed, yielding huge deficits rather than a balanced budget, Reagan's advisers prevailed on him to support tax increases.

Then congressional Republicans and Democrats together put in place a series of rules — the "pay-go" rules — designed to hold fast to the understanding that budgets needed to be balanced and public finances needed to be restrained. They required offsetting money to fund new programs or new tax cuts. These restraints died in 2001 when President Bush refused to support their renewal.

There isn't any doubt that Bush and the Republican Congress have collaborated to grow government. Fiscal constraints have collapsed, and the small-government/fiscal-prudence wing of the Republican Party lies in ruin.

The extent of the rout is shocking. Since Bush's first inaugural, the outlays (actual spending) of the U.S. government have grown at an annual average of 4.35 percent above inflation, according to calculations I made from the Office of Management and Budget's reported data.

This compares with a per-year average of 1.22 percent during the Clinton administration, 2.96 during the administration of the senior Bush, and 2.66 during the two Reagan terms.

This growth is not simply due to a burgeoning defense budget, as non-defense expenditures have increased at a 3.13-percent annual clip, far higher than Bill Clinton's modest 1.82 percent.

More ominously, during the Bush administration, major new entitlement programs have been established, requiring vast sums in the future even if present expenditures are modest.

The Medicare drug-reform law — the largest health-policy initiative since Lyndon Johnson — will cause spending of $100 billion per year by 2015, according to Bush administration estimates.

No Child Left Behind has promised states increased education funding, and the act itself is the most extensive federal intrusion in the field of K-12 education ever.

The proposed partial privatization of Social Security is, truth be told, a vast new entitlement itself, in which current contributors can use their money while still funding the benefits of the retired. By 2015, we'll be spending an additional $200 billion a year for this program.

We pay nothing for these programs now, but they write into law obligations that are very expensive down the road.

Add to this increased national police powers developed in the USA Patriot Act, the important but expensive Homeland Security initiatives, the vast increase in farm subsidies Bush supported in his past term, and the unprecedented centralization of legal matters from state to federal courts, and one gets a rush toward big national centralized government matched only by Franklin Roosevelt's New Deal and Lyndon Johnson's Great Society.

This frenetic activity has had a profound effect on the growth of government. It is easy to detect a strong shift in the government spending exactly at the time Bush took office. Using simple projections, we can calculate that the fiscal path pursued by George H.W. Bush and Clinton would have led to a government approximately 15-percent smaller today than it actually is. [See the accompanying chart at the end of this commentary.]

Yet, these massive new government programs are being, and will be for the foreseeable future, funded from borrowing.

Bush's tax cuts, which were supposed to stimulate revenue growth to offset their costs, have instead driven down federal revenues from almost 21 percent of Gross Domestic Product in 2000 to 16.3 percent last year. The tax cuts failed to stimulate enough growth to recoup the lost revenue, and economists predict they will not do so in the foreseeable future. Simultaneously, outlays have grown from 18.4 percent of GDP to 19.8 percent, leading to record-breaking deficits.

Because most of the impacts of the tax cuts are scheduled to take effect later in the decade, we can anticipate even further declines in federal revenue, and hence even larger deficits.

Is the current policy incoherence simply a result of governing and needing to satisfy interest groups? That is likely to be part of the story, but surely major constituencies still exist for prudent financing. In any case, the role of a party philosophy is to steel party members against needless capitulation to interests. Moreover, the policy incoherence is not because of the activities of Congress, the normal home of interest-group politics.

This policy incoherence comes from a strong presidency, and in particular from the strong, focused agenda of this disciplined president.

It is actually quite easy to describe the current policies of the Republican Party: big, intrusive government, providing vast new entitlements and domestic programs, vast new police and "homeland security" intrusions into civil society, and an aggressive military policy coupled with huge tax cuts that lead to ballooning deficits as the entitlements come due and the tax cuts expand on schedule.

The result is Big Government, financed by passing the bulk of the costs on to the future through massive borrowing. It is simply not possible to create a political rationale — an ideology, if you will — that can be stretched to cover these policies.

Even as the fundamental rationale of what has been the Republican Party — limited government, choice and responsibility — have all collapsed, much of the rhetoric of Republican leaders continues to read from the old script. Limited government is inevitably enshrined in the party's platform — the 2004 version says, "We believe that good government is based on a system of limited taxes and spending." Yet that principle no longer guides the GOP.

What does? For many Republicans today, the litmus test of conservatism has become one's commitment to tax cuts.

Tax cuts are justified because, so it is claimed, they inevitably lead to less government. But "starving the beast" — denying government revenue so it will have to shrink — has been a complete failure. It didn't work in the Reagan years, and it hasn't worked for George W. Bush.

Indeed, the evidence is to the contrary. The most sustained deceleration in the growth rate of the federal government in modern times — from 1991 through 2000 — occurred as taxes were raised. Tax increases were paired with program cuts to overcome the monumental deficits caused by the Reagan administration's foolhardy experiment with "supply side" financing, and because Presidents George H.W. Bush and Clinton agreed that fiscal responsibility was the key to sustained prosperity.

After 2000, as taxes were cut by Bush and the Republican Congress, outlays — in real dollars and as a percent of GDP — rose rapidly. The G.H.W. Bush-Clinton era of responsible finances was over. Without sustained fiscal discipline, government grew as taxes were slashed.

In any case, squawking about tax cuts cannot serve as a unifying public philosophy for a governing party. A more comprehensive and convincing approach is required.

It's a great irony that political scientists and citizens alike should ponder. One of the most focused and disciplined presidents in U.S. history has generated a completely incoherent program, one that saddles his country and his party with a path toward a Third World debt pattern and his party with an incomprehensible governing philosophy.