Will President Bush, a hero on the war front, turn into a goat on the domestic economy front? Some recent studies suggest that he will.
According to Scott Hodge at Washington's Heritage Foundation, unless the Bush administration alters its furious pace of domestic spending, "it will be heading for the record books, outspending the first term sprees of the last five presidents."Unlike Reagan's spending, which built up our defenses with sophisticated modern weaponry that allowed Bush to win a large scale war with fewer casualties than the weekend highway death toll, Bush has unleashed the domestic spending machine.
It has only taken two years for Bush to run up federal spending from 22 percent of GNP to 25 percent - the highest since World War II. Many conservatives blame Reagan for not doing a better job of controlling the growth of federal spending. But in retrospect, Reagan was frugality itself. At the present rate of domestic spending growth, during his first term Bush will spend "a cumulative $667 billion above the Reagan growth rate."
The explosion in domestic spending is part of the reason that the five-year deficit projection in this year's budget is $800 billion higher than the identical projection in last year's budget - and this despite the $167 billion Bush tax increase!
Just as supply-side economists predicted, the Bush tax increase did not reduce the deficit but, instead, led to more spending. The Heritage study says that every new dollar of taxes raised by last year's budget agreement has resulted in $4 in new domestic spending.
During the first two years of Bush's presidency, domestic spending in inflation-adjusted dollars has grown five times faster than under Ronald Reagan and three times the pace under Jimmy Carter.
Another recent Cato Institute study reports that in addition to fueling a new spending spree, the Bush tax increase will actually reduce revenue collections.
Instead of raising $167 billion in new revenues, the tax hike will deprive the Treasury of $341 billion over the next five years by depressing the economic growth rate and raising the unemployment rate.
If we add this $341 billion in lost revenues to the $667 upward trend in spending, Bush will add more than a trillion dollars to the public debt during his first term.
By restoring the process by which our taxes are continually raised in an upward chase after federal spending, Bush has returned Washington to normal. The special interests are again prospering while the economy and the taxpayers suffer.
(Paul Craig Roberts is the William E. Simon professor of political economy at the Center for Strategic & International Studies in Washington and is a former assistant secretary of the U.S. Treasury.)