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President George W. Bush’s spending record

In a blog post at the Wall Street Journal, James Freeman writes:

But George W. Bush is making a less credible claim, now that reducing federal spending is a top voter concern. Mr. Bush is currently portraying himself as a spending hawk, with a chart in his new memoir showing that federal spending averaged just 19.6% of GDP during his tenure. This appears to make Mr. Bush a more responsible spender than predecessors Bill Clinton, George H.W. Bush, and even Ronald Reagan.

Nowhere in Decision Points does President Bush refer to himself as a “spending hawk.” He does write:

Despite the costs of two recessions, the costliest natural disaster in history, and a two-front war, our fiscal record was strong.

I drew a different conclusion than Mr. Freeman did from the President’s book. Throughout Decision Points and this section in particular, I read President Bush as providing context to explain the decisions he made, rather than trying to make particular claims or classify himself.

Despite his post’s title, “George W. Bush’s Fuzzy Math,” Mr. Freeman does not dispute the math or the facts in President Bush’s book. He instead argues for a different way of measuring a President’s fiscal record.

The undisputed facts are:

  • Average federal spending was a smaller share of the economy during the George W. Bush administration than during each of the Clinton, George H.W. Bush, and Reagan administrations.
  • The same is true for taxes. Average federal taxes were a smaller share of the economy under our 43rd President than under our 40th, 41st, or 42nd.
  • Of the four, President Clinton’s deficits were smallest, almost entirely because his revenues were highest. President George W. Bush had the second-smallest deficits of the four.
  • The budget deficit during President Bush’s tenure averaged two percent, below the fifty-year average of three percent.

My conclusions: Relative to the economy, the federal government was smaller during the Bush Administration than under any of its three predecessors, and his deficits were small by historic standards.

Based on data provided by a frequent critic of the President’s, Mr. Freeman looks only at the change in the level of spending from the day the President took office to the day on which he left. He ignores baseline trends and the role of Congress and assigns full responsibility for the change between those two endpoints to the President. He uses these two points to compare President Bush unfavorably to Presidents Reagan and Clinton, because spending declined on their watches while it increased on President Bush’s.

Mr. Freeman applies President Obama’s “inherited” meme to federal spending, arguing that Presidents Reagan and Clinton deserve credit for reducing spending from even higher levels when they took office. He writes, “Even with a Democratic House, Mr. Reagan managed to cut spending as a percentage of GDP from 23 to 21.” Spending when President Reagan took office in 1981 was 21.7% of GDP. With a Democratic House and a Republican Senate, it grew to 23.5% in 1983, then declined to 21.2% in 1988. Mr. Freeman gives President Reagan credit for the decreases but no blame for the increases. Yes, spending declined over Reagan’s tenure, but by 0.5 percentage points, not by two points as Mr. Freeman suggests.

Yes, federal spending increased over President Bush’s tenure. The biggest increases were for defense and homeland security. While critics often focus on the $50 billion in increased Medicare spending for drugs in 2008, they ignore the much larger $350 billion in increased baseline Social Security and Medicare spending from 2000 to 2008. President Bush took political risks to propose specific changes to significantly slow the growth of both Social Security and Medicare spending. These proposals were largely ignored by Congress.

And yet even at its highest point during the Bush tenure, spending as a share of GDP was still lower than the lowest year of the Reagan Administration. Should we give Reagan credit for the slight decline and blame Bush for the increase, or should we say the Bush years were better because government was smaller?

Mr. Freeman’s approach broaches an interesting question: should we measure a President based only on the change between a President’s first and last days in office, or instead on the average levels over the full term, which incorporate both policy changes and the starting point for those changes, and which look at the full eight years rather than at just the endpoints? This debate should seem familiar: for 21 months President Obama has argued that his policies have made things better than they otherwise would have been, while the American people have rejected his policies because the results were inadequate. If President Obama leaves office in 2013 with unemployment at 8 percent, slightly lower than in his first full month of office, the endpoint logic suggests we should judge him an economic success because unemployment declined. I think we should instead compare the average unemployment over President Obama’s tenure with President Bush’s average of 5.3 percent and President Clinton’s average of 5.2 percent. I think that citizens care more about about average levels over time more than about the changes measured between arbitrary political endpoints.

It is also difficult to judge the “responsibility” of enacted changes objectively because observers differ on the appropriate counterfactual. The Medicare drug benefit President Bush campaigned on, proposed, and signed into law increased entitlement spending. To determine whether that is responsible or not, should we compare the increased spending to (a) no Medicare drug benefit, (b) the more expensive Democratic alternative, or (c) President Bush’s initial budget-neutral proposal, rejected privately at the time by House and Senate Republican leaders?

As we see from the ongoing debate on extending the Bush tax policies, the subjective choice of a baseline for comparison can lead to radically different conclusions about the budget effects of a proposed policy change. By choosing a helpful counterfactual, President Obama makes his proposal to extend $3.1 trillion of tax policies appear responsible and “cost free,” and argues the Republican proposal to extend $3.8 trillion of tax policies is an irresponsible “cost” of $700 billion. The numbers in Decision Points describe final levels rather than changes. President Bush thereby avoids entirely the subjective debate about counterfactuals.

I wish that we (in the Bush Administration) had been enable to convince multiple Congresses to enact more of the spending cuts proposed by President Bush. While President Bush’s critics frequently remind us of his decision to fulfill a campaign promise to add a drug benefit to Medicare, they forget or ignore his important fiscal policy moves in the other direction. President Bush vetoed the second farm bill; that veto was overridden. President Bush twice vetoed bills unnecessarily increasing spending for children’s health insurance. President Bush repeatedly proposed hundreds of billions of dollars of Medicare and Medicaid savings, only to find these proposals routinely ignored by Congress. President Bush proposed a long-term budget neutral drug benefit plus Medicare reform package to House and Senate Republican leaders in 2003. Those leaders supported the drug benefit but rejected the savings from the aggressive structural reforms. President Bush received little support for Social Security reform proposals that would have significantly addressed our long-term entitlement spending problem. If you don’t like the net spending increases during President Bush’s tenure, ask why Congress so often resisted the President’s proposals to cut spending.

Unlike each of his three predecessors, President Bush did not raise taxes.

George W. Bush, a wartime President, had a smaller federal government and lower taxes relative to the economy than each of his three predecessors, historically small deficits, no tax increases, and 5.3% average unemployment. He vetoed a farm bill and two health bills for spending too much. He proposed structural and incremental reforms to Social Security and Medicare that set up the current entitlement reform debate. Maybe the conventional wisdom should be revised a bit.

By | 2017-01-15T08:45:43+00:00 Thursday, 18 November 2010|