As the floodwaters left by Hurricane Katrina receded, the deluge of federal spending began. The price tag of rebuilding New Orleans and repairing the Gulf Coast may reach $200 billion, and President Bush has committed the federal government to providing the vast majority of the funding.
The Orlando Sentinel’s Michael Tackett opined, “Throughout his nationally broadcast address … it was as though the disaster of Hurricane Katrina had transformed the president from the logical heir to Ronald Reagan to some curious amalgam of Franklin Roosevelt and Lyndon Johnson.” He likened the proposed reconstruction programs to “the Marshall Plan, the Works Progress Administration and the Tennessee Valley Authority and social policy animated by the Great Society.”
Indeed, these expenses are being incurred while figures show that the real percentage increase in discretionary spending under Bush has eclipsed the Johnson administration’s record. The two Texans have run up such substantial bills for much the same reasons: expanding domestic spending at home while waging an unpopular war abroad. Reason editor Nick Gillespie quipped, “All that’s missing for the transformation to be complete is for Bush to show us the scar on his stomach, pull his dog up by the ears, and start holding cabinet meetings in the bathroom.”
Even before hurricane season, federal spending was scheduled to rise 7 percent this year with a projected budget deficit of $331 billion. The first relief bill came in at $62.3 billion. The Republican congressional leadership was determined to tack the entire cost onto the deficit. When Congressman Todd Aiken (R-Mo.) proposed an amendment to offset some of the emergency spending by cutting 2.5 cents out of every dollar federal agencies spend, House leaders prevented it from even coming up for a vote.
Taxpayer groups and deficit hawks were outraged by the spending binge. “There’s no reason to add a fiscal disaster on top of a natural disaster,” says Tom Schatz, president of Citizens Against Government Waste.
House Majority Leader Tom DeLay (R-Texas), the member of the congressional leadership with perhaps the strongest ties to movement conservatives, notoriously told reporters there was hardly any fat in the budget left to cut: “After 11 years of Republican majority, we pared it down pretty good. I am ready to declare ongoing victory.”
With these words, DeLay finally sent long-suffering fiscal conservatives into open rebellion. “I wonder if we’ve been serving in the same Congress,” said a bemused Congressman Jeff Flake (R-Ariz.). Congressman Mike Pence (R-Ind.) called DeLay “a guy who knows how to throw the gauntlet down to his colleagues.”
Pence’s Republican Study Committee decided to rise to the challenge. Members of the maverick conservative caucus launched Operation Offset, an initiative aimed at finding the cuts to finance hurricane-relief spending. They compiled a list of nearly 100 programs and $500 billion in potential savings from which their colleagues could choose offsets. “We could slow the growth of some programs, reduce or eliminate others,” says Congressman Jeb Hensarling (R-Texas), the task force’s leader. “Members may not agree with all of them, but the bottom line is Congress doesn’t have to look far to find the savings.”
“Only in Congress would offsets be dismissed entirely,” says Flake press secretary Matthew Specht. “Folks around the country recognize the need to change spending priorities.”
If so, Operation Offset aims to please them. The proposed cuts range from items that are small but ridiculous (ending Medicare coverage of penile implants would save $8 million) to those that are large and ambitious. The two prime targets are the new Medicare prescription-drug entitlement and the recently enacted $286 billion transportation bill.
House conservatives want to delay the prescription-drug benefit by a year for savings of $30.8 billion. They also favor rescinding the 6,300 pork-barrel projects tucked into the highway bill, worth $24 billion. In the upper house, Sens. John McCain (R-Ariz.) and Tom Coburn (R-Okla.) support them. Senate Finance Committee Chairman Charles Grassley (R-Iowa) called for an across-the-board spending freeze.
The budget-cutters sound an optimistic note. “All of the relief spending can be offset,” says Schatz. “Who would miss 10 percent of the U.S. government if it translated into hurricane relief?” Congressman John Sullivan’s (R-Okla.) spokesman contends “the feasibility of getting this done is very high.”
But they have met stiff resistance. House Speaker Dennis Hastert (R-Ill.) has ruled out any changes to the transportation bill or delay in prescription-drug coverage.
The deficit hawks have ruffled other colleagues’ feathers. Asked by reporters whether he would give up an earmarked bridge in his state as suggested by McCain, Congressman Don Young (R-Alaska) bellowed, “Kiss my ear!”
So far, the Bush administration has tried to stake out a middle position in the Republican split, endorsing the idea of cutting wasteful spending to fund hurricane relief while offering little in the way of specific cuts. The White House has tried to appeal to conservatives by filling its reconstruction proposals with Jack Kemp’s greatest hits.
Bush would give education and housing vouchers to displaced residents, create a Gulf Coast Opportunity Zone that offers tax incentives for investment in the damaged region, and parcel out federal land in hard-hit areas to those in need of homes. The $2,000 debit cards have been abandoned in favor of $5,000 personal unemployment accounts. The administration’s first round of tax breaks for Gulf Coast employers, totaling $6.1 billion, unanimously passed both houses of Congress.
But this conservative policy-wonk wish list will be accompanied by traditional government spending on infrastructure and social welfare. The speed with which Congress has passed relief legislation increases the likelihood of waste. And using vouchers as the mechanism for transmitting benefits doesn’t erase the price tag.
Can rebellious congressional conservatives prevail in their fight to bring fiscal sanity to the process? The odds aren’t in their favor. Most of the spending cuts proposed in Operation Offset are eminently sensible but have been floated and rejected before. The attacks on the GOP leadership’s legislative priorities give the effort the appearance of a political kamikaze mission.
John Dickerson, writing in Slate, argued that fiscal conservatives are doomed because “they are directly targeting the horse-trading that makes government go,” thus challenging a political process that thrives on giving away taxpayers’ money. “Start pulling out earmarks” Dickerson wrote, “and you unravel support for the whole bill.”
The other practical problem is that the constituency for limited government is smaller than the voting blocs that benefit from most government programs. Cutting the prescription-drug benefit may make people employed at free-market think tanks and conservative opinion magazines happy, but it won’t win many votes. With few voters willing to punish big spenders, fiscal irresponsibility seldom exacts a significant political cost.
This is true even on the putatively small-government Right. Dickerson only slightly exaggerated when he wrote, “When social conservatives balk, they represent massive organized blocs of voters who have shown their willingness to stay home. When fiscal conservatives balk, only a few thousand ornery Republicans in New Hampshire and Arizona abandon the party.” In this context, the Republican Study Committee’s proposals seem noble but unrealistic.
But political reality eventually must confront economic reality. The growing deficit is making every major Republican domestic-policy initiative, from tax cuts to Social Security reform, increasingly untenable, as even many supply-siders are coming to realize. The Wall Street Journal’s Brendan Miniter noted that if deficit spending “endangers the broader conservative agenda” it will “become the electoral issue.”
The deficit also means that the Iraq War and Bush’s welfare statism are being financed through foreign borrowing. At least some Democrats are taking notice. “We have never done this before,” Bill Clinton asserted in a recent television interview. “Never in the history of our republic have we ever financed a … military conflict by borrowing money from somewhere else.”
Clinton is of course more interested in raising taxes than cutting spending. But he is not alone and has possibly perfected the Democratic talking point against the Bush tax cuts: “We depend on Japan, China, the United Kingdom, Saudi Arabia, and Korea primarily to basically loan us money every day of the year to cover my tax cut and these conflicts and Katrina.” Waging war and growing government by borrowing from Beijing—not even Karl Rove can sell that in the red states.
With the argument framed thus, pressure for higher taxes will grow with the deficit. The Bush administration can try to hold the line, but many of its tax cuts are scheduled to expire unless Congress acts to extend them. Even some Republicans are balking.
Senate Budget Committee Chairman Judd Gregg (R-N.H.) has said he is willing to put taxes on the table. Other Senate Republicans suggested allowing the capital gains and dividend tax cuts to expire in 2008. Borrow and spend may give way to tax and spend.
Yet the House conservatives pushing for spending cuts are with Bush on taxes. In his statement announcing Operation Offset, Hensarling warned that “raising taxes will only hurt more Americans and cost more jobs.” Flake’s press secretary was adamant that “we don’t need higher taxes, just a rebirth of fiscal discipline.”
High spending and low taxes are a winning formula in the short term, but that combination cannot exist indefinitely. Mother Nature may have hastened its end.