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July 1995
Volume 13, Number 7

Budget Tricks
Llewellyn H. Rockwell, Jr.

To understand the House Republicans' budget "revolution," pay careful attention to this number: $55 billion. That's the amount federal spending will increase next year. A year later, according to their plan, the budget ticks up another $38.1 billion. It goes up an average of $45 billion every year thereafter.

Congressmen talk of "slashing" the budget, "killing" programs, "saving" money, "eliminating" the deficit, and "cutting" government. But in the end, what happens? The budget goes up. Republican control of the power of the purse, as with the Democrats, means the power to spend more of our money.

Now to the $1.6 trillion question: how many people outside the Beltway think the federal government needs to spend more money? The answer is precious few.

But don't the Republicans claim to be making real cuts, not just cuts in future increases? In places they are. But what matters to taxpayers is the overall budget. Specific programs may or may not be cut (show us!). But overall spending is still the best way to measure government growth. If it continues to climb, we've got a problem.

The programs the Republicans are allegedly cutting aren't being cut at all. Medicare is a good example. It is scheduled for a one-year increase of $10.5 billion, then an average growth rate of 5.4% forever. Liberals are wailing, while the Republicans accuse the Democrats of accusing the Republicans of cutting Medicare. Heaven forbid that the Democrats would accuse the Republicans of doing the right thing.

We've entered a new era of Congress, and that apparently requires a new vocabulary to hide what is actually going on. The new word for the new era is: "savings." The Senate plan for the budget has "savings" of $1.1 trillion. The House plan has a "savings" of 1.4 trillion.

Take notice. That's "savings" over previously scheduled future increases for the next seven years. Why limit the time frame? Why not project until the year 3000, and claim a "savings" of $1 quadzillion?

Let's say your family budget is in the red. You've got a ne'er-do-well son who gambles. Last year, he lost $20,000. This year, he wants $30,000 to lose. You agree on $25,000. Are you "saving" money? Of course not.

Congressmen shouldn't talk about budget savings (or any phrase that suggests fiscal sanity) until they have cut current spending levels. Otherwise, we'll suffer budgetspeak forever.

The claim, of course, is that the Republicans will eliminate the deficit--at some distant date in the future. Seven years? Come on. Seven years is the time between Bush's no-new-taxes pledge and Clinton's attack on talk radio. It's forever in D.C.

A slight recession would blow up the plan's economic assumptions, which rely on the "Rosy Scenario" of yesteryear: that interest payments on the debt will decline as the deficit declines. But this autopilot theory of budgeting has never worked. It made laughing stocks of the Reagan administration and its economists.

As for the actual cuts in the plan--in energy, agriculture, and foreign affairs--they are, as they say, "back-loaded." The proposed cuts get more dramatic the further they are in the future. Between 1996 and 1997, for example, the plan suggests cuts of only $200 million in farm subsidies. Suddenly, in the year 2001, that part of the budget is butchered by $2 billion.

Congress might as well pass a plan to abolish HUD, the IRS, and even itself--in the year 2050. It's equally credible to claim credit now for supposed cuts six years away. As a friend of mine says, "Hey, everyone, throw me a party: I'm going to stop drinking and smoking next year."

This Congress can't bind the next Congress. There will be a new plan next year and the year after. Congress can't budget for any year other than this one. Everything else is political fiction.

Every Congress and every president claims to have had a plan to eliminate the deficit--later. The rest of us are supposed to act like greyhounds chasing a mechanical rabbit. Sorry, but it's just not believable anymore. What matters is what is actually done, here and now.

Deficits are terrible and need to be eliminated on grounds that they lead to inflation or higher taxes or both, and to massive instability. If the public funds government debt, private investment is crowded out and interest rates are driven higher than they need to be.

But deficits are not all that's harmful. Government spending itself causes economic damage. Whether it's welfare or subsidies, foreign aid or foreign meddling, the economy suffers.

Every dime the government spends siphons resources from the private economy. Deficit reduction is only an unalloyed good if the government's share of national wealth is on the decline.

That's why Congress should reduce spending in a time frame it can actually control. Republicans should revisit the budget, and approve only those items that have a Constitutional justification.

For purely partisan reasons, the Republicans should begin by repealing the spending increases of the Clinton presidency. That would require immediate cuts of $150 billion. But it would be both too simple and too radical for Washington to accept.

Instead, we're supposed to play the game called Congressional Budget. The Republicans pretend to cut, the Democrats pretend to suffer, and the media plead for the victims of the heartless penny-pinchers in Congress.

It's up to the freshmen to turn the game board over. They weren't elected to vote for more spending. The freshmen should tell the party leadership that they refuse to support any level of overall spending higher than when they took office.

I said last year that the main test of politicians is whether they spend more or less this year than last. If they spend more, they're part of the problem, and should be treated as such.


Llewellyn H. Rockwell, Jr. is president and founder of the Ludwig von Mises Institute


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