TCS Daily


Beware Big Spenders

By James K. Glassman - May 27, 2003 12:00 AM

Last week was a very good one for the White House. Congress approved both a second tax cut and the centerpiece of the president's compassionate conservative agenda, $15 billion to fight AIDS. Israel agreed to the "roadmap" for peace in the Middle East, and the United Nations, including France, Germany and Russia, agreed to lift sanctions on Iraq.

And one other thing: President Bush nominated Joshua B. Bolten as budget director.

It was an inspired and important choice. Bolten will play a key role in decisions for the rest of this term and perhaps beyond, including government spending, further tax cuts, homeland security and health-care and Social Security reform. He knows the issues well from his current job as the White House deputy chief of staff for policy, where he performed with skill and without fanfare.

Bolten not only knows politics and policy; he also knows economics and finance. He previously worked for Goldman Sachs, the investment banking firm from whose ranks have also been drawn Robert Rubin, secretary of the Treasury under President Clinton; Sen. Jon Corzine (D-N.J); and Stephen Friedman, the top White House economic advisor.

I suspect, from Bolten's comments last week as President Bush announced the appointment that he will devote much of his time trying to contain the ancient congressional desire to spend. Bolten promised to keep "a very watchful eye on the people's money" and service as "a tight-fisted custodian of the people's money."

As a disciplined policymaker in a disciplined administration, Bolten does not make such comments lightly.

The White House, in fact, would be wise to pursue an aggressive anti-spending strategy, while re-framing the issue of budget deficits. By far the most important decisions a government makes involve how to spend, as the economist Milton Friedman noted long ago. Exactly how to raise the money for that spending - whether through taxes or borrowing - is a secondary decision. Taxes and borrowing both pull money out of the private sector for use in the public.

Borrowing itself (that is, running national debt and adding it through a current deficit) is neither good nor bad, but a simple management calculation, much like those made by corporations every day. Borrowing at a time when the U.S. Treasury can raise money through 10-year bonds paying just 3.5 percent interest sounds especially prudent - especially when tax cuts can help give the economy a needed boost.

If Bolten can change the way Americans view deficits and focus more attention on spending, he will have accomplished a great deal.

But Bolten - who holds a bachelor's degree from Princeton and a law degree from Stanford, where he was editor of the Law Review - can be expected to do more. As a cool and tough customer who knows policy matters thoroughly and who has the trust of the president (who last week called him "brilliant...tireless...calm in any storm [and] a man of complete integrity"), Bolten has the potential to become the best-ever budget director, an exceptionally difficult job, a traditional target for criticism.

In addition to his post as executive director for legal and government affairs at Goldman Sachs International, Bolten previously was in private legal practice at O'Melveny & Myers, the Los Angeles firm and served as general counsel to the Office of the U.S. Trade Representative, international trade counsel to the Senate Finance Committee and deputy assistant to President George H.W. Bush for legislative affairs. He was also policy director for the Bush-Cheney presidential campaign.

It's an impressive resume and a strong background for a job now held by Mitch Daniels, who returns to Indiana to run for governor. Big spenders and flabby thinkers will, I predict, underestimate Josh Bolten at their extreme peril.
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