LYNDON BAINES JOHNSON MARK TWO

A Socialist in the White House (Subscription required, July 3rd 2003, The Economist)

Ever since Lyndon Johnson introduced Medicare in 1965 as one of the edifices of his “Great Society”, Democrats have been taunting the Republicans as hard-hearted bastards who don't give a damn about the elderly. What better way to shut the Democrats up than a new $400 billion drugs benefit? Congress still has to reconcile the Senate and the House versions of the bills, a procedure that could take until the autumn. But few people doubt that the law will eventually pass—and that Mr Bush will enthusiastically sign it. This will also reinforce the Republicans' claim that they are better at getting things done than Democrats (who, in Republican lore, ran Congress for decades without doing anything about drug prices).

Republicans are already bragging that Mr Bush's embrace of Medicare reform is the same as Bill Clinton's embrace of welfare reform back in 1996—a manoeuvre that magically transforms a liability into a strength.There is, however, one tiny difference. Welfare reform was an admirable policy that led to a sharp reduction in welfare rolls. Medicare reform is lousy policy. The Republicans have given up any pretence of using the new drug benefit as a catalyst for structural reform. They are doing nothing to control costs or to target government spending on people who really need it. They are merely creating a vast new entitlement programme—a programme that will put further strain on the federal budget at just the moment when the baby boomers start to retire. Every year Mr Bush has either produced or endorsed some vast new government scheme: first education reform, then the farm bill, now the prescription-drug benefit. And every year he has missed his chance to cut federal pork or veto bloated bills. Federal spending has increased at a hellish 13.5% in the first three years of the Bush administration. It has risen from 18.4% of national income in 2000 to 19.9% today. Combine this profligacy with huge tax cuts, and you have a recipe for deficits as far ahead as the eye can see.

Why has the self-proclaimed party of small government turned itself into the party of unlimited spending? Republicans invariably bring up two excuses—the war on terrorism and the need to prime the pump during a recession; and then they talk vaguely about Ronald Reagan (who sacrificed budget discipline in order to build up America's defences). None of this makes much sense. The war on terrorism accounts for only around half the increase in spending. The prescription-drug entitlement will continue to drain the budget long after the current recession has faded. As for Mr Reagan, closer inspection only makes the comparison less favourable for Mr Bush. The Gipper cut non-defence spending sharply in his first two years in office, and he vetoed 22 spending bills in his first three years in office. Mr Bush has yet to veto one.

The real reasons for the profligacy are more depressing. Mr Bush seems to have no real problem with big government; it is just big Democratic government he can't take. This opportunism may win Mr Bush re-election next year, but sooner or later it will catch up with his party at the polls. The Republicans are in danger of destroying their reputation for managing the economy—something that matters enormously to the “Daddy Party” (which sells itself as being strong on defence and money matters). The Democrats can point out that Bill Clinton was not only better at balancing the budget than Mr Bush. He was better at keeping spending under control, increasing total government spending by a mere 3.5 % in his first three years in office and reducing discretionary spending by 8.8%.

The Republican Party's conservative wing stands to lose the most from this. Some conservatives credit Mr Bush with an ingenious plan to starve the government beast: the huge tax cuts will eventually force huge spending cuts. But this is rather like praising an alcoholic for his ingenious scheme to quit the bottle by drinking himself into bankruptcy. There is no better way to stymie the right's long-term agenda than building up the bureaucracy (government being a knife that only cuts leftwards). And there is no better way to discredit tax cuts than to associate them with ballooning deficits. For the moment Mr Bush is still the conservatives' darling. Will they still love him a decade from now?

Although I'd point out that Clinton's spending cuts were mostly defence-related and OJ would be pretty scornful about how important large deficits actually are, this article does raise an important point. Big government is here to stay and neither of the two parties are likely to do much to cut entitlements, bringing one to recall the remark about democracies only lasting as long as they don't vote themselves largesse out of the public treasury. Dubya has definitely been given a free pass on the level of government spending which would probably be bringing forth agonised screams of "galloping socialism" if a Democrat was OKaying them.

Posted by M Ali Choudhury at July 3, 2003 6:13 PM