Democrats playing politics with the deficit

Posted: Aug 29, 2002 12:00 AM
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 committee. 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 revenue." Even some liberals have come around to this way of thinking. Writing on, 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.