Wasteful Spending Thwarts Recovery; Although President Bush succeeded in reducing federal taxes, increased federal spending threatens to slow the economic growth that could result from his tax cuts

0 Comments | Insight on the News, August 19, 2003 | by Vanessa Pierce

Byline: Vanessa Pierce, INSIGHT

Americans for Tax Reform (ATR) reports that the average worker in the United States had to labor four-and-a-half more days this year than last to pay for government at all levels. Every year since 1977 the ATR has released its Cost of Government Day Report, which reveals the number of days that Americans have to work from Jan. 1 to pay for spending by local, state and federal governments. For 2003 the average employee worked more than six months for the government to pay taxes. The Cost of Government Day fell on July 11 this year, which is 17 days later than the Cost of Government Day in 2000. The 2003 COGD Report can be viewed at www.atr.org/cogd2003/cogd 2003.html.

"We have succeeded as a taxpayer movement in getting the Republican Party to be committed to never raising taxes and, with this administration's leadership, to cutting taxes every year," ATR President Grover Norquist tells Insight. "What we haven't done is translate that into spending restraint. There we have a real challenge."

This year the average American had to work 193 days to pay for government spending, 87 of those for federal spending. The ATR report says that the combined inflation-adjusted federal spending increase for calendar years 2001-2003 more than triples the total amount of federal spending for the previous eight-year period 1992-2000. ATR economist Daniel Clifton tells Insight that the unprecedented spending restraint during the Clinton administration was the result of significant cuts in military spending and a divided Congress. He also said that because of the surplus, politicians were saying, "yes, yes, yes" to spending initiatives and that now, with the slowed economy, they are receiving a wake-up call.

Even the nonpartisan Congressional Budget Office supported ATR's findings when it presented the likely economic consequences of President George W. Bush's 2004 budget proposals. It found that Bush tax cuts would spur economic growth, but that Bush spending initiatives would thwart or slow the growth resulting from the tax cuts.

That "yes, yes, yes" to spending has resulted in a record $22.5 billion in pork-barrel expenditures for 2003, a political bonanza brought on both by Republicans and Democrats. This year the 2003 pork alone roughly equals the gross domestic product of North Korea as listed in the CIA World Factbook. Here's where some of your tax dollars went to work: $250,000 to implement the National Preschool Anger Management Project; $500,000 for catfish health in Stoneville, Miss.; $4 million for the International Fertilizer Development Center; $6.2 million for wood-utilization research; $7.7 million for the Alaska-Wide Mobile Radio Program; and a whopping $33 million for the National Animal Disease Center in Ames, Iowa, which tops the annual Pig Book list of the watchdog Citizens Against Government Waste (CAGW).

At the press conference for Cost of Government Day, CAGW President Tom Schatz said that pork larded into the military-construction bill by Sen. Ted Stevens (R-Alaska) included "... $1.4 million for a new working-dog kennel at Elmendorf Air Force Base. So you could say that our tax dollars are already going to the dogs this year." CAGW cites Stevens as the Senate's master of pork, followed by Sens. Daniel Inouye (D-Hawaii) and Robert Byrd (D-W.Va.).

Some of the federal spending increases result from wartime costs and the military buildup, according to Brian Riedl of the conservative Heritage Foundation, but that only accounts for one-third of the spending increases. There have been "massive spending increases for farm subsidies, highways, education, health research and dozens of lower-priority programs that most taxpayers have never heard of," Riedl says.

Citing the deficit caused by this spending, but perhaps with still more spending in mind, Democrats in Congress have been speaking openly about tax increases. And never mind, says Riedl, that this year the federal government will spend $21,000 per U.S. household, $5,000 more than it did in 1999 and the most since World War II after adjusting for inflation. The problem is that the federal government can keep spending, simply borrowing the overage and taxing still more to pay the interest. Instead of asking what Washington does when it runs out of money, Riedl suggests, the better question to ask is what happens when taxpayers run out of money.

The answer, of course, is that the federal government increases the money supply calling to mind the consequence of deficits that the United States suffered under presidents Gerald Ford and Jimmy Carter when skyrocketing prices and interest rates choked businesses and brought Americans on fixed incomes to their knees. Ford famously tried to fix the economic woes by issuing WIN (Whip Inflation Now) buttons. It might have worked, cracked a wag of that era, "but they ran out of whips."

State and local governments do not control the money supply, so they borrow and/or increase taxes, political economists explain. Taxpayers in turn become so frustrated with the budget woes and tax increases that soon even recalling a newly elected governor, as is now proposed in California, doesn't seem too absurd. And, according to ATR, state and local spending now is at its highest percentage of national income in U.S. history. Even when federal spending came under control in the 1990s, producing surpluses, state spending hardly paused for a breath.