October 26, 2007

Was Johnson Really The Most Frugal President In Memory?

Investors Business Daily takes exception with the McClatchy analysis of President Bush as the biggest spender since Lyndon Johnson. McClatchy looked at the rate of increase for discretionary spending in each presidency to determine the spendthrift nature of the administrations, while IBD looks at a different measure. Oddly, IBD seems to think that LBJ ran the tightest ship:

Bush is "arguably an even bigger spender than LBJ," says a story from McClatchy Newspapers on the president's fiscal record. Pretty tough words, given that LBJ conducted both a war in Vietnam and a War on Poverty simultaneously, racking up huge gains in spending over his term and a half in office.

The McClatchy piece says discretionary spending under Bush has risen an inflation-adjusted 5.3% in his first six years, outstripping the 4.6% under Johnson — and way above President Reagan's meager 1.9%. By "almost any yardstick," the article continues, Bush "generally exceeds the spending of his predecessors."

"Any yardstick," that is, except the most important of all — spending as a share of GDP. On this, Bush is actually lower than most of his predecessors. Spending as a share of GDP is the most important measure of the size of government, since it measures what government actually takes from the national economy.

IBD notes "ironically" that their analysis makes LBJ the most frugal manager of government -- which should have given them some clue to their error. Yes, government spending as a percentage of GDP matters in terms of its impact on the economy. However, the growth of government through discretionary spending matters more -- and McClatchy's analysis shows that the Bush administration has pursued big-government solutions despite conservative opposition to such strategies.

Using GDP as a measure of spending uses one faulty assumption -- that GDP remains constant. The McClatchy analysis accounts for actual spending, not comparative indexing to a fluctuating standard. The economy stagnated in the 1970s, thanks in part to LBJ's spending spree, which is in part why Nixon's numbers appear worse than LBJ's. IBD's analysis makes Ronald Reagan the biggest government spender of the last 40 years, even though Reagan held discretionary spending increases to their lowest level in that period.

Even worse, as IBD notes, is the unchecked growth in non-discretionary spending: entitlements. The entitlement bomb will explode in this generation, and it will cripple the economy of this country unless extensive reforms are made soon. To Bush's credit, he tried to do just that on Social Security, but the Democrats and even some Republicans demagogued the debate, claiming that the program had no problems at all. Unfortunately, the White House undermined its own argument by pushing through a brand-new Medicare entitlement that will have to get reformed itself in the next few years.

George Bush has faced many challenges and met most of them well. He inherited a recession, a stock market collapse thanks to the wild '90s, and the worst attack on American soil, all within a few months, and he kept the economy from collapsing. Let's not pretend, however, that he and the Republican Congress acted with parsimony and fiscal responsibility as they expanded government across the board.

TrackBack

TrackBack URL for this entry:
http://www.captainsquartersblog.com/mt/tabhartas.cgi/15474

Comments (18)

Posted by MarkD | October 26, 2007 7:02 AM

Bush's real problem is that he doesn't have a D after his name. He's a big government big spender. I don't understand why the left hates him, he's given them most of what they want.

Posted by Angry Dumbo | October 26, 2007 7:31 AM

The IBD editorial rightly notes that in the dawn of Bush presidency 2001 budget cutting was taken the table because the rapily cooling U.S. economy was feeling the effects of the burst NASDAQ tech bubble and the events of 9/11. Agreed.

Fiscal discipline rightly took a back seat in the face of the national security threats our country faced at the time.


IBD concludes that the failure to defuse the "entitlement bomb" is the greatest disappointment of the Bush Presidency. IBD supports their conclusion by reporting the little know fact that $50.5 trillion in entitlement spending looms in the next few decades — with no way to pay for it.

$50.5 TRILLION.

No, that is not a STAR TREK currency.

Posted by Angry Dumbo | October 26, 2007 9:55 AM

Look at who fought Social Security Reform in 2005. These are the real enemies of fiscal discipline.

For the record, social security reform was killed by AARP (in the wake of the 2004 bloodbath, few Democrats wanted to go on record opposing reform, but AARP was all too happy to give them cover), which is kind of like Prohibition being opposed by Budweiser.

Back in 2005, AARP sponsored polling about SSA reform, but chose not to include people under the age of 30 in their sample. How convenient. Did you know that as of 2005, AARP perhaps the largest single lobbyist in DC, was funded to the tune of $80 million dollars in taxpayer funds.

http://www.humanevents.com/article.php?id=10731


So we paid AARP lobbyists to lobby congress?


AARP sucks. Thanks for screwing me and my children.

Posted by Otter | October 26, 2007 9:57 AM

Wasn't LBJ the Democrat who expanded the Vietnam war, after another Democrat dragged us into the Vietnam war?

Posted by brooklyn - hnav | October 26, 2007 10:11 AM

Please...

Some can be so stubborn, when they have it wrong, they cannot simply let it go.

There are misguided elements who have become such jaded Conservatives (not talking about the Captain), they sit on the sidelines with overt judgment actually debasing a very good effort and even their own Conservative interests.

Jumping overboard is not healthy.

They have given the GOP a bad rap, which clings to a populist fashionable myth today.

And they seem foolish enough to try to make the distortion of the record worse.

I still wonder how some see the resignation of the former AG is helping matters.

Posted by CoRev | October 26, 2007 10:40 AM

Angy Dumbo I'm not so sure it is a BIG problem.

...little know fact that $50.5 trillion in entitlement spending looms in the next few decades — with no way to pay for it.

$50.5 TRILLION.

No, that is not a STAR TREK currency.

That estimate is based, I believe, on a 75 year window. In 75 years our GDP should be at @ $100T earth based dollars. National debt at $51T will represent 57% of GDP. Today's national debt is @ 65% of GDP. Yes, ACTUALLY lower than today.

Borrow? Yes, what do you think will happen to those non-transferable treasury bills currently representing the Social Security Trust Fund (SSTF)? My guess, the largest percentage of them will be converted from intra-governmental to publicly held debt. NO CHANGE IN OVERALL NATIONAL DEBT!!! They are already counted there.

Posted by CoRev | October 26, 2007 11:27 AM

Boy, can't count/type. That should have been 51%.

Posted by LarryD | October 26, 2007 11:31 AM

Yes, what do you think will happen to those non-transferable treasury bills currently representing the Social Security Trust Fund (SSTF)? My guess, the largest percentage of them will be converted from intra-governmental to publicly held debt. NO CHANGE IN OVERALL NATIONAL DEBT!!! They are already counted there.

Those non-transferable treasury bills are basically IOUs. They represent money being spent by Congress now. When the IOUs come due, they will have to be paid with real currency. That means some combination of borrowing and taxes. Which the economy won't be able to take. Ultimately, the promises of the entitlement program cannot be kept. It's beginning to happen in the EU.

Posted by Angry Dumbo | October 26, 2007 12:10 PM

Please, don't confuse me with someone who knows. Read the GAO's report.

http://www.gao.gov/new.items/d07389t.pdf

I do know politics. As a political issue, AARP's derailing of social security reform made perfect sense. Seniors are four times more likely to vote than the generations that follow them.

Unless younger people hold them accountable (not likely) politicians will continue passing the buck for re-election buying expensive health care on credit and passing the bill to younger taxpayers and their children.

No guilt trip. Just cold hard political reality. They call it the third rail for a very good reason. Fiscal responsibility simply doesn't win votes and its all about getting re-elected.

AARP still sucks.

Posted by Jack Okie | October 26, 2007 1:40 PM

I blame the Republican Congresses more than Bush for the spending. Any President has only so much political captital, and has to be judicious in how it is used. It's not like the Republicans in Congress were fighting for fiscal restraint and Bush pushed them into spending. Reagan's administrations are a good example, IIRC, in that the increased defense spending led to deficits, which I believe were the result of some horse-trading with the Democrats.

I do wish Bush had vetoed McCain-Feingold.

Posted by flenser | October 26, 2007 2:28 PM

Yes, government spending as a percentage of GDP matters in terms of its impact on the economy. However, the growth of government through discretionary spending matters more.

It all depends on how you chose to define "growth of government". If you define it as the percentage of GDP government takes, Bush has been average. It makes no difference to the economy whether the money goes to discretionary or non-discretionary spending.

Using GDP as a measure of spending uses one faulty assumption -- that GDP remains constant.

No, it does not. It assumes that as a country grows its government expenditures will grow also. That may or may not be an accurate assumption but its very different from the one you mention.

The McClatchy analysis accounts for actual spending

That's an absurd standard. It implies that government spending in actual dollars should be a fixed constant in a country with an exploding population.


IBD's analysis makes Ronald Reagan the biggest government spender of the last 40 years, even though Reagan held discretionary spending increases to their lowest level in that period.

That's not much of a refutation. Facts are facts, and the economy does not care whether the government defines money as being spent on "discretionary" or "non-discretionary" programs. That is a political distinction, not an economic one.

Lastly, I still don't see who somebody who argues for an amnesty for tens of millions of illegal aliens who are currently costing us billions and who would then cost us trillions can claim to be a fiscal conservative.

That indicts George W Bush, but also Ed Morrissey.


Posted by Burford Holly | October 26, 2007 2:49 PM

The number nobody wants to talk about is the interest on the national debt, which is skyrocketing.

In 10 years, we can finally abolish the IRS ! I mean, since we're going to be sending our taxes to China, we can just cut out the middle man and address the payments directly to Hong Kong. Let them balance the books. I hear they are real whizzes at that sort of thing.

Posted by Jack Okie | October 26, 2007 2:53 PM

What a hoot! Burford Holly, Goldwater Republican.

Posted by Paul Milenkovic | October 26, 2007 4:03 PM

One thing missing from the discussion is the ghost of Herbert Hoover and Treasury Secretary Andrew Mellon.

Post tech bubble and post 9-11, the economy had the risk of going into serious recession. President Bush applied "full power" to all three economic levers -- cutting taxes, increasing Federal spending, and a loose monetary policy.

We are probably reaping the whirlwind of President Bush being the "anti-Hoover" -- high oil prices, mortgage meltdown. Historians talk about Hoover as a disaster, and perhaps we are seeing the flip side of the coin of taking the Keynean advice.

The interesting thing about Herbert Hoover is that he was far from an advocate of "laissez faire" and "do nothing" as far as the darkening economic crisis. Famously, he was pursuing the policy of fiscal responsibility that critics on both the Right and Left give lip service to ("runaway discretionary spending") along with inflation-fighting monetary policy (OK, the Federal Reserve was independent back then, but a president has influence on these things), which only served to accelerate the cascading failures of elements of the economy. The other principle he held to was one of corporate welfare before personal welfare. He was not against Federal intervention to soften personal misery; he favored policies and subsidies to entities that would provide jobs instead of to direct relief on account of his concern for the corrosive effects on individuals and on society of direct payments -- think of the Great Society and Moynihan's warnings and we are still picking up the pieces of an urban underclass with many of the problems spread to a rural underclass.

For all his troubles, Hoover's approach was derisively called "trickle down", and any kind of government intervention to enhance broad-based economic activity instead of payments or tax cuts directed at favored groups (Reagan and Bush tax cuts vs Clinton's consumption-oriented "Middle-Class" tax cut) get tarred with this brush.

Hoover was the "compassionate Conservative" of his day (in contrast to the Calvin Coolidge variety) -- as a mining engineer, a wealthy person, and President, we was probably a combination of a George W Bush and a Bill Gates.

The catastrophe of the Great Depression had a great personal effect on him -- his critics likened him to Michael Brown of recent Katrina fame -- but Hoover was neither incompetent nor uncaring. The Depression continued to lump along under FDR's alphabet soup until WW-II happened, but FDR had better "spin doctors." Perhaps with FDR it didn't start under his watch, the public accepted the let's throw something against the wall and see if it sticks approach, and Hoover took the Great Depression and loss of his reelection bid as a deep personal failure -- the man was a mining engineer and engineers take failures of their projects personally.

So here we have George W Bush, the Republic anti-Hoover, and we are laying into him has reckless with the economy. Think, people, of the consequences of the "fiscally responsible" approach many are calling for.

Posted by Burford Holly | October 26, 2007 7:25 PM

Washington and Jefferson warned about the dangers of debt, and how America must never, ever go into debt to fight a foreign war. Hmmmmmmm.

Jefferson suggested that in times of war, the federal government should shut down all nonessential functions like road building for the duration of the conflict.

Posted by CoRev | October 26, 2007 8:46 PM

Burford Holly

The number nobody wants to talk about is the interest on the national debt, which is skyrocketing.
In fact BH the net interest on debt as a percent of revenue has gone DOWN. In 1998 it was 14% as of 2006 it was @9.5%. I haven't checked the numbers, but we borrowed less and revenues were higher, so it is sure that the interest on debt is even lower today.

Stop the fear mongering, or read better econo-sources. Here's one: http://www.optimist123.com/

Posted by BurfordHolly | October 27, 2007 10:17 AM

I've lost patience with these cherry picked annual numbers.

Our ability to outgrow deficits is not infinite. We cannot generate infinite GDP or taxes. However, we CAN accumulate an almost infinite debt load, because (unlike revenue) it carries over from year to year. Our debt will exceed our GDP in a couple years. What happens when your personal debt exceeds your income? Well, you have the equivalent of mortage payment due every month. And that's where we'll be - every citizen will be paying off the equilavent of mortage.

This is how the Soviet Union folded, and we will be rewarded with a similar standard of living - bare cement apartments without running water.

Posted by CoRev | October 27, 2007 12:26 PM

BH, your pessimism is NOT justified. We have carries a debt since the Civil War. never have we paid off the debt left over form the Civil War, and yet you rant about how it is going to be impossible to keep it up? You need to do more research. You are causing most of your own angst over this subject.

Cherry picking? How so? Show me where we have actually paid off the debt. I can show you a few years, eight of the past 50, that we have had a surplus. Cherry picking? Show us how the economy has done in those 50 years. Better still, show us how the economy has done since the last time we had zero National debt.

Stop projecting, and think. You'll be a happier person for it.

I'm not trying to be snarky, that's how wrong I think you are!

Post a comment