The Compassionate Conservative's Bait-and-Switch Budget

Reagan pioneered the Bush tactic: Cut taxes, generate deficits, express shock, compel off-setting cuts in social spending

By Robert Kuttner

Most of the debate about President George W. Bush's proposed budget has focused on fiscal and tax issues: Are the tax breaks excessive? Would they go to the right people? Will they really promote long-term growth? Is the resulting deficit sustainable? Does the economy really need this kind of stimulus? These are important questions. And the skepticism expressed by Federal Reserve Chairman Alan Greenspan, as well as the recent critique by 10 Nobel laureates in economics, should give Congress plenty of pause. However, a whole other issue has been obscured by the tax-and-deficit debate: the devastating effect of the Administration's budget priorities on domestic social spending.

The Bush budget claims that federal outlays will rise, on average, by about 4% in fiscal year 2004. But beware of averages. This is the same Administration, after all, that insisted that the "average" working family would get an income tax break of $1,083. In both cases, of course, the average conceals extreme differences: Bill Gates and I have an average net worth of about $15 billion, but that doesn't make me any richer. In truth, the typical, or median, household will receive less than $300 in tax cuts.

On the spending side of the equation, unrealistically low projected increases in defense and homeland security outlays are averaged with real cuts in other spending. The Administration's proposed military budget hike of just $15.3 billion doesn't count the likely costs of an Iraq war. (The Turks alone are holding us up for an unbudgeted $15 billion in collateral outlays.) A budget-busting supplemental defense appropriation of at least $100 billion is likely later this year. And the proposed jump of just $1.3 billion for homeland security is pitifully inadequate and will have to be increased, too. If we include the higher interest on the debt, the real 10-year costs of the Bush tax cuts of 2001 and the proposed cut of 2003 are more than $3.5 trillion, according to Citizens for Tax Justice.

The common casualty of these huge tax breaks and unacknowledged defense hikes is, not surprisingly, domestic outlays. This means not just social spending but everything from science and technology to public health, highways, and government statistics. In domestic program after domestic program, appropriations have fallen far short of the budget authority--so a nominal hike is often really a cut. As hidden costs of the tax reductions and defense needs mount, other outlays will only be cut further.

Discretionary domestic spending has been on a downward slide for two decades, from 4.8% of gross domestic product in 1978 to just 3% by 2000. According to a Brookings Institution study, the Bush budgetary priorities will require roughly a 40% real cut in discretionary spending over the next decade. Ronald Reagan pioneered the maneuver that Bush is trying to emulate: slash taxes, generate big deficits, express surprise, compel offsetting cuts in social programs. Rinse. Repeat.

But Bush, let's recall, advertised himself as a compassionate conservative. Supposedly, he opposed not social investment per se but merely its bureaucratic form and its handouts to the undeserving. Social services were to be rechanneled through religious institutions. Federal aid to education was supposed to be increased and coupled with greater school accountability. Welfare outlays were going to be redirected to supporting work and families. Bush even talked about adding a new prescription benefit to Medicare. But as the fine print of Bush's budget makes clear, his compassionate conservatism turns out to be a grand case of bait and switch.

For instance, in his No Child Left Behind Act, Bush struck a bargain with the Democrats to trade high-stakes testing of schoolchildren for more federal aid to needy districts. But as the group OMB Watch points out, Bush's proposed education outlay of $22.7 billion under No Child Left Behind is actually $600 million below the necessary inflation adjustment--and a startling $9.4 billion below the spending that Bush's own legislation authorizes. Under Bush's spending priorities, any new prescription-drug benefit will come out of the hide of Medicare through a new privatized approach that caps the federal contribution and leaves seniors to make up what's not covered--or do without. Child-care spending is at least $5 billion below what is necessary to care for kids whose mothers must work under new welfare reform mandates. School lunch programs are also being cut. In everything from Head Start to Medicaid, the strategy is to convert a federal program to a capped block grant and leave the states holding the bag.

So while the tax cuts are misdirected and the endless deficits are alarming, the budget's other mischief warrants notice. A budget sets national priorities. Bush's budgetary priorities are as warped as his arithmetic. While the looming deficits are alarming, their sources and consequences deserve far more attention and debate than they are now receiving.

Robert Kuttner is co-editor of The American Prospect and author of Everything for Sale.

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