I used to enjoy the civility of Congressman J. C. Watts even when he tried to give the GOP credit for the reduction in the Federal deficit during the 1990’s – and in the same breath advocated tax cuts and more defense spending:
We balanced our budget in a time of peace, proven that we had not lost the discipline so necessary for free people. We reduced taxes not once, but twice.
[Defense spending/GDP – blue; Nondefense Federal purchases/GDP – purple]
Which is one reason for the 2 graphs with the first showing Federal transfer payments as a percent of GDP from 1955 to 2004 and the second showing both defense spending as a share of GDP and non-defense Federal purchases as a share of GDP over the same time period. But this post is not about the former Congressman from Oklahoma but how the National Review has already opened the 2006 debate as to fiscal policy even before the New Year’s celebration.
Let’s start with the advice to GOP Presidential hopefuls offered by John J. Miller. One consistent theme was that anyone who wishes to be the next Republican nominee must be for more tax cuts. So how would Mr. Miller advise that we reduce spending so as to avoid a fiscal fiasco? Well, let’s look at his advice to Senator Hagel: “He should be forthrightly pro-war”. In other words, more defense spending. So is Mr. Miller advocating returning to the low levels of transfer payments that we observed during the Eisenhower Administration? Let’s take a look at his advice to Governor Romney:
His top goal for 2006 is to enact health-care legislation that provides universal coverage through market mechanisms, which could put some real substance behind new claims of a Massachusetts Miracle.
I guess not. Let’s hope that NRO Financial’s Lawrence Kudlow can remind Mr. Miller that money does not grow on trees:
The Democrats, meanwhile, are helping Bush and the GOP by reminding the electorate that they remain soft and untrustworthy on national security and the terror war, while policyless and obstructionist on budget and tax issues. In particular, the Murtha-Pelosi obsession with immediate troop withdrawal in Iraq is playing poorly nationwide – even splitting the Democrats internally. Worse, the Democrat’s ACLU-type response to reports of NSA eavesdropping without court warrants is a huge mistake. The latest Rasmussen poll reports that 64 percent of respondents believe the National Security Agency should be allowed to tap cell phones and e-mails in order to intercept communications between suspected foreign and domestic terrorists. The key word here? National security. The key thought here? Carping Dems are not to be trusted. The key political issue here? There’s a good reason why the U.S. has not been attacked since 9/11: Tough security policies by the entire U.S. government, at home and abroad, designed and administered by the Bush administration, are in place.
Oh good grief – is Larry going to simply engage in bashing Democrats as traitors as he fails to understand that we can have both security and civil liberties? No, he does get around to the fiscal policy issue:
In other words, they must nationalize the midterm elections of 2006 just as they did in 2002 (when they discussed terror war security) and just as the Gingrich Republicans did in 1994 (when smaller government, lower taxes, and no socialized healthcare took center stage) … On the economy, Bush’s pro-growth strategy should stress large-scale budget cuts (such as, for the first time, real cuts in porkbarrel spending, including corporate welfare) and permanent tax relief to sustain economic growth. The Democrats have no budget-cutting policy whatsoever, nor are they capable of developing one, while on tax cuts they have no answer except the tiresome mantra of tax hikes for the rich. Citizens Against Government Waste calls 2005 a record year for pork. The group identified 13,997 pork projects in the fiscal 2005 appropriations bills, costing taxpayers $27.3 billion, an increase of 31 percent over fiscal 2004. These are sickening facts. The president must work overtime to erase them in 2006 and truly produce a taxpayer protection budget. If Bush embraces such a Mike Pence approach, championed by the House Republican Study Committee, of shifting big-government conservatism back to limited-government conservatism, he will rejuvenate the GOP base.
I guess Kudlow did not wish to repeat his claim that Reagan slashed Federal spending – else being hammered again by Brad DeLong so he dusts off that old canard from Congressman Watts that it was the Gingrich Republicans who reversed the Reagan-Bush41 deficits with massive spending cuts. But take a look at non-defense purchases and Federal transfers both as shares of GDP. I don’t see any evidence that a small government agenda from the Gingrich Republicans were responsible for the fiscal responsibility during the Clinton Administration. There were two significant reasons for the improved fiscal position: (1) tax rate increases that the Republicans voted against; and (2) the (temporary) peace dividend that lowered defense spending as a share of GDP.
Kudlow does rightfully complain about the increase in “porkbarrel spending” which interestingly has occurred with a GOP controlled Congress under a Republican Administration. Now it is true that Congress is patting itself on the back for reducing transfer payments by a staggering $8 billion a year. If Kudlow thinks reducing Federal spending by less than $10 billion a year is anything other than a drop in the $600 billion a year General Fund deficit bucket, maybe Mr. Miller should not listen to him.
The last time we had anything approaching a fiscally responsible small government Republican Administration was when Eisenhower was President. Fifty years ago, the Cold War necessitated that sizeable defense spending as a share of GDP. Unless the modern GOP convinces voters that we should return to an era of very low transfer payments – which I doubt they’ll even try to do – the notion that we should have a large defense department and permanently low taxes strikes me as simply not understanding basic arithmetic. Yet – I suspect the National Review’s opening will be the intellectual highlight of the right wing’s mantra in this year’s fiscal policy debate.
Update: Many thanks for Bakho for reminding us of this from Medium Lobster:
The year will close with the triumphant return of Budget Deficit Jesus, summoned at last by a thousand perfect burnt offerings to rapture the faithful to supply-side heaven. Those who failed to believe in the healing power of Reaganomics will be cast from this blissful Eden to a dark abyss where upper-class tax cuts do not grow the economy, but cause weeping and gnashing of teeth.