1/15/2006

My Left Wing :: "Borrow and Squander": Bush's Budget Theory

Stirling Newberry coined the phrase “borrow and squander” to describe basic Republican economic theory. The phrase is dead-on accurate.

"Borrow and Squander": Bush's Budget Theory
by: Bonddad

January 15, 2006 at 09:00:17 America/Chicago
Stirling Newberry coined the phrase “borrow and squander” to describe basic Republican economic theory. The phrase is dead-on accurate. Although the Republicans claim to be the party of fiscal responsibility, they are in fact a party that has no compulsions about destroying national finances. Although their pet theories have no basis in reality, they continue to taut such phrases as “tax cuts pay for themselves” not because this is true, but because it is a great sales pitch to the upper-income levels. On the spending side, the Republicans are some of the most egregious spenders of national revenue, far worse than any tax and spend liberal ever was.
Economy/Jobs/Labour :: Bonddad :: "Borrow and Squander": Bush's Budget Theory
First, let’s look at the fiscal situation when Bush entered office. According to the Congressional Budget Office the government had a surplus (in billions) of 69, 125 and 226 for the fiscal years 1998, 1999 and 2000. Total federal debt as a percentage to total US GDP decreased from 64% in 1992 to 57% in 2000. Interest expense as a percent of total government revenues decreased from 26% in 1992 to 17% in 2000. No matter how you slice the 1990s, Clinton and a Republican controlled Congress did a magnificent job of handling the nation’s finances.



Then came Bush. He was in prime position to continue the trend. He had the opportunity to demonstrate his “fiscal conservativeness”. So far, he has failed miserably.



Bush inherited a 128 billion surplus in 2001. Since then, Bush has continued to run budget deficits. The CBO currently projects a 2005 fiscal deficit of 331 billion. While this is an improvement on the 2004 deficit of 412 billion, Bush started with a surplus which tarnishes this “achievement”. Total debt as a percentage of GDP has inched up from 55% in January 2001 to 64% in 2005. Bush’s interest payments/percentage of receipts has decreased from 18% to 16%. However this has less to do with fiscal prudence and more to do with a period of record low interest rates.



Bush’s “tax cuts pay for themselves” theory is part of the problem. First, conservative mouthpieces have started to argue Bush first cut taxes in 2003. This is a complete 100% lie. Bush first cut taxes in 2001 – a full two tears earlier. In 2001, revenues from individual taxes totaled 994 billion. The CBO is projecting total receipts for 2005 of 927 billion – 6.7 below 2001 levels. Obviously, the laugher curve is, well, a laugher. In addition, individual tax revenues as a percentage of GDP have dropped from 9.9% in 2001 to 7% in 2004.



Let’s compare this period to the previous expansion. First, let’s remember the Clinton raised taxes in 1993 in order to help deal with the deficit. Supply-side pundits claimed this would kill growth. They were 100% wrong in that assertion, as evidenced by one of the longest expansions in US history. Tax revenues from individual taxpayers increased from 476 billion in 1992 1 trillion in 2000. Tax revenues as a percentage of GDP increased from 7.6% to 9.6% 00 hardly an unbearable burden. And all of this led to three budget surpluses.


Bush’s second problem is he spends like a “tax and spend” liberal. The Cato Institute – one of the most conservative think tanks in existence – issued a paper titled “Bush is the biggest spender since LBJ.” Bush has engaged in a voluntary war (that was supposed to pay for itself with oil revenues) that is responsible for over 200 billion in costs. And those are the costs we know about. Then there is the prescription drug benefit program (where the government is not allowed to negotiate costs with drug companies), which Bush underestimated as well. Finally, this entire Republican Congress has gone along with this program, forever preventing them from reasonably asserting they are the party of fiscal prudence.


In short, Bush’s budget record is terrible. He cut government revenue, increased total debt as a percentage of GDP and spends like a drunken sailor. His PR team continually overestimates the budget deficit in order to claim success when the numbers come in below expectations. In short, Bush is a 100% failure. Thankfully, his performance has destroyed the Republican’s mantle of “fiscal conservatives.”

My Left Wing :: "Borrow and Squander": Bush's Budget Theory

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