January 21, 2004

January 21, 2004 | WebMemo on Federal Budget

The State of Spending

Federal spending -- especially discretionary spending -- has soared over the past two years, and new programs proposed by the President will make it difficult to check this growth. The President's State of the Union pledge to limit growth of discretionary spending to 4 percent isn't nearly enough. If the President is serious about limiting federal spending and not further burdening future generations, he should firmly oppose new entitlement programs and veto spending bills that contain corporate welfare. Only by taking such a strong lead could the President force Congress to reform its big-spending ways.

A Low Hurdle

Conservatives across the nation are raising concerns about the huge increases in spending coming out of Washington. The impact this will have on our economy, taxpayers, and future generations is of paramount concern. President Bush tackled this issue in his State of the Union Address by saying he would hold the line on discretionary spending growth to 4 percent. He took aim at the deficit, unveiling his intention to cut it in half.

While the goal of curtailing spending is laudable, the proposal falls short of a grand vision predicated on fiscal discipline and conservatism necessary to curb big increases in spending now and into the future.

A Spending Spree

Federal spending's drag on the economy is now over $20,000 per household -- its highest level since World War II -- and growing. Mandatory spending reached 11 percent of GDP for the first time ever. The recent Medicare drug bill represents a huge long-term burden on the fiscal health of this country. It was a massive entitlement expansion passed with no financing program to pay for it and is estimated by CBO to cost well over $2 trillion dollars over a 20-year period. The final check for this program will come due just when Social Security and Medicare run out of money.

Spending has increased twice as fast under President Bush as it did under President Clinton. From 2001 to 2003 total spending grew by 16 percent. Certainly the terror attacks of 9/11 placed additional demands on spending for homeland security, a strong defense, and rebuilding New York. However, this accounts for less than half of the new spending that has occurred since 9/11. What was so sorely lacking during this time was self-discipline required to balance fiscal priorities.

Presidents Roosevelt and Truman signed budgets during World War II and the Korean War which actually decreased non-defense spending. However, we saw no such balancing of our fiscal checkbook after 9/11. Instead we saw a spending spree in Washington where budgets written by Congress and signed by the President during the War on Terror actually grew non-defense spending by 11 percent during this period.

Compared to the President's record of a discretionary spending increase of 27 percent over the past two years, holding discretionary spending to 4 percent growth might seem like quite an accomplishment to some. However it is hardly a prescription for long term fiscal health when taken in the overall context of growth in the budget, its burden on taxpayers, businesses, and families, and the burgeoning deficits looming in the future in Medicare, Social Security, and other programs like the Pension Benefit Guarantee Corporation.

The President has laid out visions for other priorities such as education and a mission to Mars. Education spending has increased by 65 percent over the past two years, and still the President's proposals will likely contain additional spending. This comes at a time when cash is piling up in Washington because states cannot spend it quickly enough.

Cost estimates for the President's space initiatives range from $500 billion to $1 trillion. But the fact is we just do not know how much it will cost for a mission to Mars, complete with a pit stop on the moon. The President has a vision of new technology to explore this new frontier and would be engaging the country on a long-range project. Past experience tells us that such grand undertakings are plagued with cost overruns, delays, and technical difficulties. The start up costs identified by the President are just a minimum down payment on the ultimate costs of this initiative, and he has presented no long-range plan to finance such costs. The full costs will most likely come into play just as the bitter fiscal reality of the Social Security and Medicare problems confront the nation.

Rein It In

Instead of setting such painless goals as keeping growth in discretionary spending modest or cutting the deficit in half, the President should take a firm grip on the reins of the federal checkbook and the taxpayers' wallet by firmly opposing any new entitlement and vetoing any bill that contains corporate welfare. He should take a strong lead and force Congress to change the dynamics that lead to wasteful spending and pork barrel projects by rewarding members who want to save money, not hand it out by the fistful. These are the bold actions that are necessary to pass on a strong economy and sound fiscal foundation for the next generation.

About the Author

Alison Acosta Fraser Senior Fellow and Director of Government Finance Programs
Domestic and Economic Policy

Related Issues: Federal Budget