TCS Daily

The Spend of Our Union Is Strong

By Veronique de Rugy - February 1, 2006 12:00 AM

According to President George W. Bush, "the State of our Union is strong and together we will make it stronger." To that end, the President appeared committed to making his tax cuts permanent and to make America more competitive. He once again proposed to reform Social Security. And in an effort to restore his Administration's long lost fiscal credibility, the President called on Congress to support a tough budget that reins in domestic spending.

And in fact, Bush's speech contained some proposals about controlling the size of government. For instance he said "This year my budget will [...] reduce or eliminate more than 140 programs that are performing poorly or not fulfilling essential priorities." He added "I am pleased that Members of Congress are working on earmark reform because the Federal budget has too many special interest projects. And we can tackle this problem together, if you pass the line-item veto."

Some skepticism is warranted. In his State of the Union 2001, he said, "We have two choices. Even though we have already met our needs, we could spend the money on more and bigger government. [But] unrestrained government spending is a dangerous road to deficits, so we must take a different path." Yet, that same year total spending increased by 8 percent compared to 4 percent the previous year under President Clinton. The administration argued that homeland-security and defense spending drove much of the increase. But the data show that in FY2002 spending increased in all areas. Defense discretionary outlays rose by 14 percent and nondefense by 12.5 percent.

In his State of the Union 2002, Mr. Bush said, "To achieve these great national objectives -- to win the war, protect the homeland and revitalize our economy -- our budget will run a deficit that will be small and short term so long as Congress restrains spending and acts in a fiscally responsible way." That year, spending increased another 7.3 percent with discretionary spending up a whopping 12.5 percent.

In 2003, Bush explained, "The best way to address the deficit and move toward a balanced budget is to encourage economic growth and to show some spending discipline in Washington, D.C." Yet that year Congress jammed the Omnibus bill with 8,000 earmarked pork projects -- such as $150,000 for the Rock School in Philadelphia and $250,000 for the Call Me Mister program at Clemson University -- and the President failed to veto the bill.

In 2004, the president underlined that "This [fiscal discipline] will require that Congress focus on priorities, cut wasteful spending and be wise with the people's money. By doing so, we can cut the deficit in half over the next five years." But he did not veto the spending bill even though Congress added $37 billion to his proposed budget.

Finally last year, the President told us, "America's prosperity requires restraining the spending appetite of the federal government." Accordingly, he did propose to cut 150 wasteful government programs potentially saving taxpayers $16 billion. Unfortunately, Congress only agreed to cut $6 billion. Yet the president didn't oppose or even threaten to oppose the bloated spending bill.

So when Mr. Bush says that this time he is really committed to fiscal responsibility, one should be only cautiously hopeful. Especially since he then proceeds to undermine his own rhetoric by proposing a list of over two dozen new or expanded spending initiatives.

Here are some of the new spending items:

- New funding for the Advanced Energy Initiative -- a 22-percent increase in clean-energy research at the Department of Energy to:

  • promote the development of alternative fuel for automobiles
  • subsidize 'high risk' energy research and development
  • promote the construction of new nuclear power plants
  • advance the development of ethanol
  • advance the development of fuel made from the waste part of plant crops.

- The American Competitiveness Initiative to encourage innovation throughout our economy by:

  • doubling the federal commitment to basic research programs in the physical sciences over the next ten years.
  • making permanent the research and development tax credit.

- Increase funding to train 70,000 high school teachers, to lead advanced-placement courses in math and science.

- Fund 30,000 math and science professionals to teach in classrooms and give early help to students who struggle with math.

- Add resources to encourage young people to stay in school.

- New funding to states to end waiting lists for AIDS medicine in America.

- Nationwide effort with African-American churches and faith-based groups to deliver rapid HIV tests to millions

After the State of the Union address one is left wondering and conflicted: President Bush's tax agenda is good news for the American people. Reforming Social Security would also be good for workers and retirees. But in order to maximize the economic benefits of these policies, the President needs to put our money where his mouth is and deliver on his budget promises. Is he willing to do that?

Veronique de Rugy is a Research Fellow at the American Enterprise Institute.



Well put
Well put, Ms de Rugy. The only problem is, cuts in domestic spending on the order of 16 billion, or 6 billion, are a drop in the bucket. We are overspending massively on poorly managed programs, such as Homeland Security, Katrina relief or the rebuilding of Iraq, due to incompetent oversight by political hacks the President has appointed. We're spending the bucks, but getting no bang for them.

What to do? It will be up to the next administration, in 2008, to fire all the incompetents (that would be every appointee for the past five years) and start over again. Meanwhile, I think we are going to have to bite the bullet and realize that the formula Lower Taxes equals Greater Revenue is deeply flawed. We're going to have to start taxing the corps and the upper brackets again, just as we were doing in the late 90's. When, let's recall, we had balanced budgets and a rising stock market.

Line Item Veto
“just as we were doing in the late 90's. When, let's recall, we had balanced budgets and a rising stock market.”

The stock market increases in the late nineties were unsustainable, as was the bulge in taxes they produced. The Clinton administration NEVER projected or planned for the budget surplus years…they were caught by surprise as were virtually all economists.

Economic growth in the 21rst century is sustainable and can eventually lead to balanced and surplus budgets (by about 2012) IF spending is managed responsibly.

The only immediately effective way to deal with bloated omnibus spending bills loaded with pork is through a LINE ITEM VETO. Legislation (and, if necessary, a Constitutional Amendment) supporting a Line Item Veto should be enacted by Congress now.

Bush is the biggest spender since LBJ. He is telling another lie.
Bush's first lie: I will not nation build.
bunch of little lies
Then the whopper:
We will balance the budget.

The only positive part of this disaster of bugetiting over the past 6 years is that the Democrats are so hungry to repeal the tax cuts that people are not buying their horrible line of tax more so we have less deficit.

How about tax less and spend less. Then the economy will be lots better.

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