The Myth of Bush the Spender

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Reason blog writes that “George W. Bush outspent Lyndon Baines Johnson" in his first four and five budgets. But Reason is being misleading. They only look at, discretionary spending, a small part of the Federal Budget, do not adjust for GDP and do not include spending on homeland securety and veteran affairs.

Thus they write that the figures are

1. Bush: +35.2%
2. LBJ: +25.2%
3. Reagan: +11.9%
4. Nixon: -16.5%
5. Clinton: -8.2%

But if we look at a more relevant figure, Federal Non-defence spending as a share of GDP Bush does not look as bad.

1. Nixon: +2.5%
2. LBJ: +1.4%
3. Bush: +0.6%
4. Reagan: -0.8%
5. Clinton: -0.9%

In 2001 Federal non defense spending was 15.5% of GDP, and expected to be 16.1% of GDP in 2006. Note that this increase includes increased domestic anti-terror spending and other defense related spending of perhaps 0.2-0.3%% of GDP. (I use the latest revised estimates of spending and GDP in 2006 total federal spending 2.567 billion, defense spending 447.4 billion, GDP 13.142 billion. Historic figures here and here.)
I don’t think this way of measuring is perfect. You have inertia in politics, and Federal spending is sensitive to the business cycle. But Reasons way of counting is even more distorting. Why only focuse on a figure that represents less than 20% of Federal non-defense spending? In fact their statements are is even more deceptive.

Non-defense Discretionary spending expanded by 79.4 billion 2001-2006. (340 to 420 billion $, compared to total federal non-defense spending in 2006 of ca 2.200 billion $)

But this figure includes +15.3 billion $ in increased homeland defense spending post 9/11 and +8.9 billion in Veterans Affairs. Maybe Noam Chomsky is bothered by the increase of this type of spending, but few right-wingers are (I assume this is why Reason excludes defense spending to begin with). Excluding the non night-watcher state spending went from 305 billion $ to 360 billion $ 2001-2006.

Here is the most interesting part. If you measure as a percentage of GDP discretionary Spending under Bush has decreased! In 2001 the figure was 3.4% of GDP, compared to 3.2% of GDP in 2006. If we exclude Homeland Security and Veterans spending the decrease is even larger, 3.0% to 2.7%.

The two most idotic parts of spending are probably agriculture and spending on the Environmental Protection Agency. If the 2006 estimates hold Bush has managed to slash this by 24%. Adjusted for inflation and GDP Bush will also have cut spending on among others Housing and Urban Development, Energy, Transportation, Labor, Interior, Treasury, Health and Human Services .

Total discretionary spending has stood still 2001-2006 as a share of GDP, and as stated above decreased by some 10% if one excludes defense and Homeland Security. Instead of applauding the cuts Reason gives it's readers the impression that Bush expanded spending by over 30%.

So why is Federal non-defense spending increasing? The culprit is without a doubt Health spending and Medicare, the hungry beasts LBJ unleashed on the US society. These two alone stand for almost 1 percentage point of automatic federal spending increase the last 5 years. (Bush does deserved critism for the prescription drug bill, whosle horrible budgetary effects are not yet discernible but will be soon.)


Relevant Facts


The Federal deficit is expected to be 2.7% of GDP in 2005 and down to 1.7% in 2007. This is a substantial decrease, as the deficit was above 4% just a couple of years ago. Despite strong political pressure Bush achived this without raising any taxes.

The other cricial figure is how much the government in total taxes the country as a share of GDP (including indirect taxes). During his term Clinton increased this by +2.2% of GDP. During Bushs 5 first years the Federal confiscation rate went down, -2,9% of GDP. Reagan managed to cut total taxes by -1.2% after 8 years.

Fact are clear: Bush is NOT the big government spender the so called libertarians are accusing him of. He has rightly increased the Night Watchman state during a time of war, but cut the rest of discretionary spending by some 10% and cut axes by an historical of 400 billion $ per year.

Why the distortions?

But shouldn’t those who oppose big government exaggerate in order to put pressure on Bush? My answer is yes, but that many libertarians are doing this in the wrong way and I suspect for the wrong reasons.

The reason the Federal budget is slowly expanding is the Welfare Programs the Democrats initiated and expanded, especially on health (and soon on Social Security). If you oppose big government the greatest battle for the coming years besides the environmentalist quasi-religion is health care (and environmentalist fanaticism). Health spending has a income elasticity of 1.6, and is already financed by 45% by the taxpayers. Once you expand these programs it is almost impossible to cut or even restrain them, just look at the beating Bush took on Social Security.

So what do the Democrats want to do? Socialize health care. In the end I have no doubt they want to make it a completely nationalized industry, in the process expanding taxes and government by maybe one third. Once you have done this the US economy in effect becomes Canada. Not quite Sweden, but nowhere near as free as it is today. Of course the quality of health care will decline sharply, and taxes will have to increase by hundreds of billion.

Instead of using declaring all out war on this terrible agenda the free marketers are going for social acceptance. By inaccurately painting Bush as bad as the Democrats they make it much more likely for the left to take power.

Of course from a personal and social perspective of chattering class people it is much “cheaper” to attack Bush than to attack Democrats. Disliking Bush is better for the stake of social conformism. The way to avoid cognitive dissonance of being pro-market and wanting social acceptance is to make up an incoherent story that Bush is as bad or worse Statist as the Democrats. This is also what the Economist has been doing the last 4 years.

Bush has cut taxes, cut or mostly restrained spending, quashed Kyoto and expanded free trade. If he has not done more it is because of political and ideological pressure, not a part of his agenda. The Democrats dreams of turning the US economy into the French or Swedish sytem.

In my opinion true liberterains shoud recognize the enemies of freedom and fight the right battles. The argument is NOT that Bush should not be critized for Statiskt policy, but that we shouldn't exagerate his statism and underestimate that of the left with data manipulation.

2 Comments

The Medicare Drug benefit has got to be the worst "camel's nose under the tent" supported by Bush. On the face of it, it will cost nearly $100 billion a year, but no doubt it will be expanded because it "won't provide enough".

They only look at, discretionary spending, a small part of the Federal Budget, do not adjust for GDP and do not include spending on homeland securety and veteran affairs.

When it comes to inflation-adjusted increases in discretionary spending (comprising most defense and nonentitlement spending), Dubya beats LBJ

If they're leaving out homeland security and veterans affairs, they aren't telling us about it in that blog post. Number magic.

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This page contains a single entry by published on October 13, 2005 5:47 PM.

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