Last week (Aug. 27), the Congressional Budget Office released
new budget projections showing larger deficits over the next few years than
previously estimated. The deficits are also larger than those earlier
forecast by the White House Office of Management and Budget.
As I predicted, Democrats immediately attacked the Bush
administration for cooking the books. Senator Kent Conrad, D-N.D., chairman
of the Senate Budget Committee, in a burst of creativity, accused the White
House of using "Enron-type accounting." How original! I bet no one else has
ever thought of using Enron as an example of flawed accounting. His
cleverness just knocks me over.
Sen. Conrad went on to indict the administration for having "no
plan" to deal with the budget. His charge would have had a great deal more
credibility, however, if Conrad himself had a plan, which he does not. In
fact, the chairman of the Senate Budget Committee only has one thing to do
each year, which is to come up with a budget resolution. But Conrad didn't.
The Senate now operates without any budget control, which is a key reason
why deficits are re-emerging. Makes one wonder why we even have a budget
It's hard to take too seriously criticism about having no plan
from someone incapable of performing the basic function of his job. Yet that
is what Conrad is doing.
Congressman John Spratt, D-S.C., ranking minority member of the
House Budget Committee, tried to help the hapless Conrad by suggesting the
idea of a budget summit. Boy, what an original concept! Why didn't someone
think of this before?
Of course, the idea of a budget summit is a transparently
pathetic effort by Democrats to sucker George W. Bush into making the same
mistake his father made back in 1990. The elder Bush was pushed into budget
negotiations with congressional Democrats by his disloyal budget director,
Dick Darman. He talked the first President Bush into abandoning his solemn
pledge not to raise taxes, just so Darman could get a deal and look good. As
a result, he virtually guaranteed his boss's defeat in 1992.
The elder Bush should have known better. A study by the Tax
Foundation in 1990 showed that the net effect of all the budget negotiations
of the 1980s was to increase taxes AND deficits. Deficits increased in
almost all budget summit years. The reason is that Democrats always demanded
increases in domestic spending to compensate them for raising taxes and
promising to cut spending at some later date. The result was a surge in
spending after each summit.
Of course, Democrat pledges to restrain spending were utterly
insincere. That is why the only meaningful part of the deficit reduction
packages was the tax increase. As Ronald Reagan often noted, he was promised
$3 of spending cuts for every $1 of tax increase in the 1982 budget deal.
"Unfortunately, although the taxes went into effect, Congress never cut
spending by even a penny," he later lamented.
This result is consistent with academic research, which shows
that higher taxes nearly always lead to higher spending, not lower deficits.
The only thing that leads to real reductions in spending is tax cuts. As
Nobel Prize-winning economist Milton Friedman put it, "The only effective
way to restrain government spending is by limiting government's explicit tax
Even some liberals have come around to this way of thinking.
Writing on Slate.com, Mickey Kaus recently argued that the Bush tax cut has
aided spending restraint, "because Congressional (and executive branch)
spenders now know that the money is not there to spend." He also notes,
contrary to conventional wisdom, that it is far easier politically to raise
taxes than cut spending.
Fortunately, George W. Bush is not likely to be fooled by
Democrat tricks. Also, unlike his father, he is blessed with a loyal staff
that will not try to talk him into doing something he knows is wrong. (I
feel sorry for the staffer who tries.) Therefore, there is no chance of a
budget summit, nor any legislated tax increase. Indeed, it appears that Bush
is going to press for even more tax cuts when Congress reconvenes.
Democrats foolishly believe that they can win in November
running against deficits and tax cuts. Republicans hope they do. They know
too well that this never worked for them. And with inflation and interest
rates at historically low rates, it is hard to see what Democrats can offer
voters in the way of tangible benefits in terms of even lower rates.
Deficits are not a problem. As a share of the economy, they are
very modest. Raising taxes or rescinding tax cuts -- which are the same
thing -- would only fuel additional spending and do nothing to reduce
deficits or aid the economy.