A few conservatives are rightfully concerned that the massive General Fund deficit, which is still above $500 billion a year, is too high and are turning on the Bush Administration. The National Review naturally thinks spending is too high and blames Democrats who must be someone making the Republican led government be so irresponsible:
We all know the litany that got us to this point: Bush has never vetoed a congressional spending bill, even as Congress has agreed to fund an estimated 14,000 pork projects, up from around 1,000 in 1996; he has presided over a federal spending increase of 33 percent since 2001, with 55 percent of the increase in the last two years unrelated to defense, according to Brian Riedl of the Heritage Foundation; and he created a new entitlement, signing a $500 billion prescription-drug bill. Conservatives could just manage to swallow all this, when there was the prospect of Social Security reform changing the politics of the nation’s most important entitlement … A repeal of the prescription-drug bill – which we opposed at the time of its passage – is unlikely to happen and would be demagogued by Democrats as paying for Katrina on the backs of the ailing elderly. But President Bush must endorse a serious, realistic set of budget offsets, and the most promising area is corporate welfare. But President Bush must endorse a serious, realistic set of budget offsets, and the most promising area is corporate welfare. It doesn’t have a natural base of support, and cuts in it will be much harder for Democrats to oppose. Republicans should have taken it on long ago. Now is a perfect moment. According to the RSC, eliminating corporate welfare would cut $5 billion in 2006 and $50 billion over ten years.
Let’s excuse the fact that NRO must be unaware of the fact that the Social Security Trust Fund is actually running surpluses so slashing this program will not reduce the General Fund deficit unless we slash benefits while maintaining the payroll tax at current levels. After all, NRO has identified something I can agree with even if it addresses about 1% of the issue.
Senator Hutchison was on the talk shows asking us not to take what I called Option Six, which would be for the government to do nothing in the Katrina-Rita relief efforts. So which one of Kash’s five options did she endorse. Not only did she rule out tax increases, she ruled out reducing defense spending, mandatory spending, and even domestic discretionary spending when asked about specifics. At several points, she was honest enough to say she did not know where we should cut spending, but she also suggested we defer some of our capital investment projects. Let’s put aside the obvious criticism that we should not defer rebuilding the levees or improving the highways in light of how people had to cope with Katrina and Rita. I’d rather focus on the fact that the deficit is really a long-term issue. Deferring spending rather than reducing it or finding taxes to pay for it is more akin to Enron accounting than it is fiscal responsibility. So in a way, the Senator was advocating Kash’s Option Five – having future generations pay for the Katrina-Rita cleanup and a whole lot more.
Update: While the best that Robert Novak has to offer in the way of spending cuts is delaying highway construction and the implementation of Bush’s massive Rx legislation (note deferrals not long-term spending reductions), here is his take on increasing tax revenues:
The beleaguered conservatives see all this spending leading inexorably to a tax increase, which would redistribute the tax burden to the disadvantage of the successful and threaten an economic recession.
Where to begin with addressing the economic illiteracy of Mr. Novak? Let’s see, deficit financing is an increase in taxes over the long-term even if the actual payments to the Treasury are deferred. As far as Mr. Novak’s fear that a Keynesian recession might emerge from having the “successful” (aka rich) pay more in taxes, let’s turn the microphone over to Mark Thoma:
It’s said again and again, and this is the latest example, that we can’t raise taxes because that might hurt the economy’s recovery from Katrina and now Rita, so we will have to cut programs to pay for the spending instead. How is it that cutting government spending doesn’t reduce aggregate demand and GDP and hurt the economy in the same way as raising taxes? … Arguments about long-run economic growth and tax rates are being mixed up with arguments about the level of GDP in the short-run.
Mark’s point about “arguments about long-run economic growth and tax rates are being mixed up with arguments about the level of GDP in the short-run” is exactly right, but Novak has been mixed up on economics for decades.