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The Phony War Over the Budget

By George F. Will
Sunday, May 11 1997; Page C07

When Giovanni Giolitti, prime minister in many perishable and forgettable Italian governments between 1892 and 1921, was asked if it was difficult to govern Italy, he replied, "Not at all, but it's useless." Americans who feel that way about the governance of their country can point to the contours of the balanced budget agreement, which is said to reflect healthy and historic "compromise."

The president proposed holding domestic spending to essentially its current portion of GDP, continuing the decline of defense spending as a portion of GDP, and allowing entitlement spending to continue to grow relative to discretionary spending. From the other side of the barricades, Republicans proposed holding domestic spending to essentially its current portion of GDP, continuing the decline of defense spending as a portion of GDP, and allowing entitlement spending to continue to grow relative to discretionary spending. From this conflict came compromise.

Americans who find such budget "wars" boring, and who are increasingly uninterested in voting in the elections that pick the warriors, are scolded by their betters. However, the scolded have a point. And "if younger generations have become less accepting of government, it is partly because they are denied ownership of current budgets." So say C. Eugene Steuerle and Gordon Mermin of the Urban Institute in an illuminating essay, "The Big-Spending Presidents."

Steuerle and Mermin rank the 17 presidents of the last 100 years in terms of the change in domestic spending as a percentage of GDP during their tenures. The top five, and their increases in domestic outlays as a percentage of GDP, are: Nixon (5), Hoover (4), Eisenhower (2.9), Truman (2.1), Bush (1.6).

Who ranks 17th? FDR, under whom domestic spending declined 3.6 percent of GDP because defense spending increased by 37 percent of GDP and because most New Deal programs – jobs, unemployment compensation – were temporary or countercyclical. Under "progressives" Theodore Roosevelt and Woodrow Wilson, government activism consisted primarily of regulation – of food, drugs, railroads, monopolies, the currency (the Federal Reserve system).

The top five spenders produced almost three-quarters of the domestic spending growth in this century. That four of the five are Republicans suggests, say Steuerle and Mermin, that ideology does not strongly determine domestic spending.

What does? Readily available resourc\es. When money is easily found, the political class spends it.

Until recently, four things made money easy to find. The most important factor since 1954 has been the decline of the defense budget, from 14 percent to today's 3.4 percent of GDP. Truman, Eisenhower, Nixon and Bush spent "peace dividends" resulting from the end or waning of wars, hot and cold.

Second, inflation – a huge tax on holders of government bonds – allowed government's debt-to-GDP ratio to fall while deficits accumulated. Third, inflation decreased the burdensomeness of debt and increased taxes as "bracket creep" floated taxpayers into higher brackets. Fourth, Social Security taxes increased in barely noticed and unresisted increments from 3 percent to 15.3 percent (retirement, disability, Medicare) of taxable wages. Since the mid-1980s, the surplus of Social Security revenues over outlays has been used to run – and expand – the government.

The party is over. The "peace dividend" can be spent only so many times. Since 1984 tax brackets have been indexed for inflation, which is now so low that it does not strongly serve the stealthy repudiation of a portion of the government's debt. And most Americans now pay more in Social Security taxes than in income taxes, and are intolerant of increases.

Thus today's fiscal "straitjacket," which, say Steuerle and Mermin, explains why "Republican and Democratic balanced budget proposals have similar effects on the size and composition of government." The government's trajectory is dictated by the dead hand of past Congresses – those that erected the entitlement programs. Hence the sense of a growing majority of voters who believe, in Steuerle's and Mermin's words, "they are denied ownership of current budgets."

Today's ideological rhetoric is so hot only because it is so disconnected from choices the political class really contemplates making. That class, for which politics is less a competition between creeds than a shared profession, appears sharply divided by stark principles only because it is essentially content in the straitjacket, which members of that class pretend prevents them from treating their principles as practical.

But the "straitjacket" analogy misleads because the jacket confines only those eager to be confined. What is supposedly an epochal budget "battle" is really a conspiracy of political careerists to convince the country that they are prevented from making career-jeopardizing choices that would challenge what other Congresses have done in precommitting today's and tomorrow's revenues.

Democrats and Republicans pretend to be brandishing clenched fists at each other, but they really are shaking hands across the barricades.

© Copyright 1997 The Washington Post Company

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