The Public Policy: When the Republicans Cut Spending
Ferrara, Peter
THe PublIc PolIcy The Public Policy When the Republicans cut spending by Peter Ferrara C C onservatives have been sorely disappointed at the failure of Republicans to cut...
...We need to go back to considering budget cuts on the order of $150 billion per year, as we did under both Reagan and Gingrich in relative terms...
...That was watered down some in the Senate, but the result was still a big reduction in government...
...That package was close to 5 percent of the federal budget at the time, which would be the equivalent of roughly $150 billion today...
...But it is not true that Republicans have never kept their campaign promises to cut spending and reduce the size of government...
...Total federal discretionary spending, as well as the subcategory of nondefense discretionary spending, declined from 1995 to 1996 in actual nominal dollars...
...As a result, virtually all the gains made in reducing government during the Gingrich era have now been lost, with federal spending climbing from 18.4 percent of GDP in 2000 to 20.5 percent today (probably more with the weakened economy...
...In constant dollars, adjusted for inflation, the decline was 5.4 percent...
...A A n even bigger reduction in federal spending occurred right after the Republicans took over both houses of Congress in 1994, led by then Speaker Newt Gingrich...
...The lower it is, the more workers and families have the freedom to choose how to spend their own earnings, rather than having the government choose how to spend it...
...That is a huge achievement...
...Unfortunately, a senior Senate Finance Committee staffer and a policy analyst at a major conservative think tank both quite wrongly denounced the Ryan-Sununu strategy as too draconian and unrealistic, even though the think tank publishes lists of proposed cuts in wasteful and unnecessary spending each year much larger than that...
...Moreover, in constant dollars, this non-defense discretionary spending never returned to its 1981 level for the rest of Reagan’s two terms...
...In nominal terms, non-defense discretionary spending actually declined by 7.1 percent from 1981 to 1982...
...What this history shows is that when the Republicans have principled conservative leadership committed to reducing government spending, they have proven able and willing to do so...
...Instead, he led the expansion of Medicare in the form of a massive new entitlement program for prescription drugs, even as federal projections revealed Medicare to be unaffordable...
...Total federal spending relative to GDP declined from 1995 to 2000 by an astounding 12.5 percent, a reduction in the federal government relative to the economy of about one-eighth in just five short years This was accomplished not just by reducing discretionary spending, but, even more importantly, by fundamental structural reform of some programs...
...When they lack such leadership, they lapse into confusion as a pale imitation of the Democrats trying to buy votes with taxpayer money...
...Peter ferrara is Director of Entitlement and Budget Policy at the Institute for Policy Innovation, and General Counsel of the American Civil Rights Union...
...But the roaring inflation at the time masks the true magnitude of the Reagan spending cut achievement...
...This suggests promising prospects for a future President McCain to reduce the bloated, overgrown federal government, for he has long taken a principled stand against wasteful and unnecessary spend ing...
...Even with the Reagan defense buildup (which, remember, won the Cold War without firing a shot), total federal spending as a percent of GDP declined from a high of 23.5 percent of GDP in 1983 to 21.3 percent in 1988 and 21.2 percent in 1989...
...Indeed, budget restraint of this magnitude would be more than sufficient to finance the transition to a major reform involving personal accounts for Social Security...
...U U nfortunately, after 2000, there was no Reagan and no Gingrich to lead the way, and no effective leadership on the budget and spending...
...But these reforms have now been lost during the Bush era, culminating in the recent embarrassment of a farm bill costing $300 billion in completely wasteful and unnecessary spending...
...In sharp contrast to John McCain, Barack Obama has promised to vastly increase federal spending by close to a trillion dollars per year, a bone-crunching increase that would shatter both the economy and economic freedom...
...Twice in recent decades conservatives made of much sterner stuff than these two have accomplished what they have insisted is impossible...
...Government spending as a percent of GDP is a good reverse index for economic freedom...
...Enormous surpluses were produced instead...
...The historical record shows that when they have had good leadership, as in the case of President Reagan or former House Speaker Newt Gingrich, Republicans were quite successful in cutting back Big Government...
...The combination of cutting taxes to produce booming economic growth while restraining federal spending in the face of that growth allowed the federal surplus to climb as high as a record $236 billion in 2000...
...It’s a proven formula that has been demonstrated over and over at the state level as well...
...That’s a real 54 THe aMeRIcan sPecTaToR sePTeMbeR 2008 reduction of 10 percent in the size of government relative to the economy...
...When the Republicanstook control of Congress in 1995, they were greeted by President Clinton’s 1995 budget proposals that still projected federal deficits of $200 billion per year indefinitely into the future, despite a record tax increase in 1993 that greatly contributed to the sweeping Republican victories in 1994...
...This disappointment has translated into Republican losses at the polls as conservatives have explored the joys of fishing on Election Day...
...It was these Republican budget policies, along with tax cuts on capital investment, that helped to produce a booming economy and surging revenues that finally eliminated persistent federal deficits going back to the 1960s...
...THe PublIc PolIcy The Public Policy When the Republicans cut spending by Peter Ferrara C C onservatives have been sorely disappointed at the failure of Republicans to cut runaway federal spending when they held majorities in Congress in recent years...
...Truthfully, President Bush had not campaigned on cutting government, and he soon demonstrated that he had no intention of doing so...
...By 2000, total federal discretionary spending was still about the same as it had been in 1995 in constant dollars...
...The 2004 Ryan-Sununu legislation providing for large personal accounts proposed financing the transition to the accounts in large measure by phasing in budget restraint over eight years, rather than all at once...
...By 1988, this spending was still down 14.4 percent from its 1981 level in constant dollars...
...As a percent of GDP, federal discretionary spending was slashed by 17.5 percent in just four years, from 1995 to 1999...
...That reform was incredibly successful, with the welfare rolls under the old program reduced by 60 percent nationwide...
...These are long-term conservative, free market goals...
...sePTeMbeR 2008 THe aMeRIcan sPecTaToR 55...
...Among the biggest budget-busting items are national health insurance and a proposed new global war on poverty financed by American taxpayers...
...Conservatives, wake up to what is happening, or lose your freedom, and deservedly so...
...PeTeR feRRaRa The Republican Congress also fundamentally reformed farm aid programs, with federal handouts to agriculture and federal control over farming greatly reduced over time...
...We forget now that when Reagan came into office in 1981, he forced through Congress not only his famed historic tax cuts but also a package of budget cuts...
...The House passed an overall federal budget in 1995 providing for a trillion dollars in budget cuts over 10 years, even bigger in relative terms than the Reagan cuts of 1981...
...In constant dollars, non-defense discretionary spending declined by 14.4 percent from 1981 to 1982, and by 16.8 percent from 1981 to 1983...
...Broad entitlement reform based on personal accounts, along with the extension of the highly successful 1996 block grant reforms to the rest of the means-tested federal welfare programs, would dramatically reduce federal spending over the long run...
...That is a measure of how not just Republicans but even some conservative activists have lost their way in recent years...
...The higher it is, the less freedom they have to spend their own money as they choose, and to engage in the pursuit of happiness...
...In 1996, the old Aid to Families with Dependent Children (AFDC) program, dating back to the 1930s and the New Deal, was block granted back to the states under a mandate for each state to design its own welfare program based on work for the ablebodied...
...This is how to balance the budget...
Vol. 41 • September 2008 • No. 7
