Wednesday, September 21, 2005

It Grows On Trees, Doesn't It? IV

Mallory Factor, chairman of the Free Enterprise Fund writes here about our federal government’s spending spree. He says that when a family experiences a crisis it restrains nonessential spending due to revenue limitations, while “Government, because of its ability to tax and borrow, seems constrained by nothing at all.”

Factor notes that “Real nondefense discretionary spending is already up more than 35 percent over Bush’s first 5 budget years, more than triple its total increase during all 8 years of Clinton.” Some of that 35% is related to security issues rising out of 9/11, but that represents a relatively small portion of the total.

Some of my friends have been quick to point out that it is Congress rather than the President that holds the purse strings. Yes, but the President wields the veto pen. There is continual give and take between the legislative and executive branches in developing a budget. It is a two-way street. Factor says that our spendthrift Congress has been “Emboldened by a president unfamiliar with the veto pen….”

Indeed, President Bush has rarely threatened to veto anything. His recent threat to veto the energy bill proved to be empty when push came to shove. The result is that these two branches of government have effectually conspired to go nuts spending the money of future taxpayers on everything from useless bridges to near-universal pharmaceutical coverage.

Some of my friends have also pointed out that deficit spending can actually be a good thing. Done wisely for the right reasons, deficits are OK, but we must live within our means. We can’t spend ourselves out of debt.

Most families and businesses do deficit spending by borrowing money. Indeed, when the family around the corner experienced a crisis, they took out a second mortgage on their house. But they also sold off their snowmobiles, off road vehicle and sports car, and eliminated all other debt. For many months they bought only absolutely essential groceries. Their clothes came from the thrift shop. Our government should do the same to finance crisis spending.

Factor says that our spending binge leaves us with only three options to cover the costs:

  1. Raise taxes. The President has already (thankfully) said no way.

  2. Roll back Bush’s productive tax cuts (promoted by Sen. Harry Reid D-NV). This is the same thing as raising taxes.

  3. Cut other discretionary spending.
Thankfully, options 1 and 2 appear politically unviable. Factor writes about members of the Republican Study Committee that are working on option 3 (report – PDF). He suggests, as did John Fund here, that a good “first step will be to repeal the record 6,000-plus pork-barrel projects in the recent transportation bill.”

Let’s hope the RSC has enough political moxie to pull it off.

(See previous posts on this issue here, here, and here)

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