Billions and billions dig a deeper hole

Veronique de Rugy is a senior fellow at the Mercatus Center at George Mason University.

If President Bush’s budget for fiscal 2009 is approved in its current form, U.S. government spending will have increased by more than $1.2 trillion since President Clinton left office; adjusted for inflation, that’s a 35% increase. Bush has increased spending at three times the rate Clinton did when he was president, and also has given us the biggest defense budget since World War II -- and that’s regularly budgeted defense spending, not counting funding for the wars in Iraq and Afghanistan.

Yet, as in the past, Bush is proud of his fiscal discipline and projects the end of the deficit in 2012. That sounds great, but it’s misleading. This budget -- like all of Bush’s budgets -- is packed with gimmicks that hide the cost of the administration’s insatiable appetite. Bush’s $3.1-trillion request for 2009 would raise spending by 6% over last year and 67% over 2001. The surge in overall spending indicates no serious trade-offs are being made. The administration argues, for example, that much of the spending goes to protect America from its enemies. But shouldn’t the administration also use those threats to justify long-overdue cutting of waste in the Pentagon?

Instead, the defense budget continues to explode, thanks to the use of emergency supplemental spending packages, which do not get counted toward the overall deficit until years later. To give a sense of how that works, when Bush made his fiscal year 2008 budget request, he told us the deficit was going to be $239 billion. A year later, as we factor in supplemental requests, we find the 2008 deficit is $410 billion, and it will get larger as additional supplementals come in.


In fiscal 2009, which begins in October, the budget gap is seen at $407 billion; after “emergency” spending is included, it will be a lot higher. Bush’s deficits represent a significant short-term deterioration in the U.S. fiscal outlook. Republicans argue that these deficits remain small relative to the gross domestic product, but the national debt, which has ballooned since 2000, will amount to a whopping 36.7% of GDP in 2009.

The final deficit number for 2009 will almost certainly be much higher than it looks now. The bill for what is now a $145-billion economic stimulus package, for example, will grow as special interests demand perks. That process has already started: The 39 million members of AARP are sending daily e-mails to congressional offices demanding that Social Security recipients be in line for the proposed $600-a-person payments in the bill that House leaders negotiated with the White House. This largesse would cost us $23 billion.

Also, if we are in fact in a recession, more Americans will lose their jobs, potentially adding tens of billions in mandatory spending on unemployment benefits to the deficit.

But it gets worse. Of Bush’s $987.6 billion in discretionary spending, more than half -- $515.4 billion -- would go to the Pentagon, but that doesn’t include any war funding. To be sure, the president did request $75.8 billion in emergency funding, of which $70 billion is targeted for the war in Iraq and fighting terrorism, with the remainder going toward hurricane relief for the Gulf Coast. However, because this amount received an emergency designation, it is not included in the deficit projections.

That war spending figure is totally inaccurate, by the way. It does not include enough money to fight the wars for more than a few months in 2009. If recent history is any indication, the war budgeting is off by $70 billion to $140 billion. In 2007, we spent more than $190 billion on the wars. In 2008, Bush has requested about $200 billion, of which only $100 billion was appropriated and included in the deficit projections for the year. It is unlikely that the cost of the war for 2009 will suddenly drop to $70 billion.

And that’s true even if the United States withdraws some of its troops from Iraq. After six continuous years of war in Afghanistan and Iraq, U.S. military equipment is wearing out fast. The Pentagon is focused on recapitalizing, and these spending requests will be sent to Congress in emergency bills for many years to come, including 2009.


Not to worry, though. The president’s projections show the budget running a surplus of $48 billion by fiscal 2012. That fantastical figure includes some rosy assumptions -- that the Democrats in Congress enact Bush’s proposal to trim the growth of Medicare and Medicaid by $195.7 billion over five years; that the alternative minimum tax is allowed to hit more taxpayers after the 2008 tax year; and that the wars in Iraq and Afghanistan are not funded beyond fiscal 2009. Even if all that came true, the White House should be focusing on reducing the size of government, not just reducing overspending.

The $3.1-trillion fiscal 2009 budget proposal represents Bush’s last chance to establish his legacy. Unfortunately, it will be one of massive deficit spending that will be paid for by generations to come.