Social Studies January 2006

Why Republicans Can't Cut Spending

Why are Republicans having such a hard time cutting federal spending? The answer has to do with a critical shift in the GOP's governing strategy, dating back to the late 1990s.
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In September, shortly before an indictment cost him his job as House majority leader, Rep. Tom DeLay, R-Texas, outraged conservative Republicans by saying that (as The Washington Times paraphrased him) there was "no fat left to cut in the federal budget." Within hours, conservatives erupted, and on Capitol Hill they vowed to prove DeLay wrong.

With the fiscal 2006 budget completed except for the last formality (the House is expected to make the budget official as soon as it returns from recess), conservatives have declared victory. In a press release last month, Rep. Mike Pence, R-Ind., announced, "With the passage of this Deficit Reduction Act, including an across-the-board cut in federal spending, the 'Republican Revolution' is back."

And, indeed, this first post-DeLay budget proves DeLay wrong. Spending is not completely uncuttable. It is, rather, 99.5 percent uncuttable.

The Deficit Reduction Act of 2005 is, strictly speaking, a deficit-reduction act only in the Washington sense of the term—meaning, it is part of a plan to increase the deficit. It consists of about $40 billion of reductions in spending on entitlement programs, spread over five years (fiscal 2006 through 2010). Based on Congressional Budget Office forecasts, the Deficit Reduction Act will reduce entitlement outlays by about 0.5 percent over that period and cut cumulated deficits by about 2.5 percent. Wow.

Meanwhile, another budget bill is slated to cut taxes by $70 billion over the same five-year period. The net effect of the two bills (known as reconciliation bills) would be to increase the deficit by $30 billion. "The fact that the overall effect of reconciliation taken together was to enlarge rather than reduce the deficit undermines the credibility of anyone claiming that this was a deficit-reduction package," says Maya MacGuineas, the president of the Committee for a Federal Responsible Budget, a nonpartisan fiscal-watchdog group.

Judged in purely fiscal terms, then, the reconciliation action resembles the old joke about a man who fell out of a plane without a parachute. Fortunately, there was a haystack below him. Unfortunately, there was a pitchfork in the haystack. Fortunately, he missed the pitchfork. Unfortunately, he missed the haystack.

The reconciliation bill focuses on entitlement programs such as Medicare, Medicaid, and student loans. Not to be overlooked are the discretionary accounts. Here, the Republicans' budget is indeed tight. The White House boasts that, thanks in part to a 1 percent across-the-board reduction, total discretionary spending (that is, defense and homeland security, plus domestic discretionary programs) will grow by only 1.1 percent in fiscal 2006, which is below the likely rate of inflation. G. William Hoagland, the director of budget and appropriations for Senate Majority Leader Bill Frist, R-Tenn., notes that domestic discretionary spending (which excludes defense and homeland security) is budgeted to decline a little, a feat not seen in Washington for years.

But, again, the Republicans missed the haystack. Domestic discretionary spending accounts for only a sixth of the budget, and the other five-sixths are growing. According to the Committee for a Responsible Federal Budget, Congress reduced nondefense discretionary spending by $106 billion over five years, but it more than offset those cuts with $237 billion in added spending on defense, Iraq, and emergencies like Katrina and bird flu.

All of that is before counting billions more in likely supplemental appropriations, notably for the Iraq war, which is being conducted off the books. "Appropriations represented some success this year, in that the line was held on nondefense discretionary spending," says Brian Riedl, a senior budget analyst at the Heritage Foundation. "At the same time, Congress continues to put $100 billion to $150 billion a year into emergency supplemental bills, and those never get counted in the final number."

If your paramount concern is reducing the federal deficit, then the best that can be said for the 2006 budget is that it may do less fiscal damage than the budgets of 2005, 2004, 2003, 2002, and 2001. But, as has become pretty obvious, deficit reduction is not the paramount concern of today's conservative Republicans. Their concern, rather, is to scrape away at the calcified mass of programs that constitute Big Government. On that measure, how did they do?

Not particularly well. Riedl says, "I didn't find much in the reconciliation bill that will have a substantial impact on the budget or on the programs themselves." Many of the reductions involved fee increases, spectrum-auction proceeds, and other measures short of fundamental programmatic reform.

Moreover, the total spending reduction in this year's reconciliation bill was not just smaller than in previous reconciliation bills, but smaller by an order of magnitude. Riedl calculates that in inflation-adjusted dollars, Congress cut $447 billion in 1990, $244 billion in 1993, and $232 billion in 1997, versus only $40 billion in 2006.

This wasn't because the Republicans weren't trying hard. To the contrary, overcoming Republican divisions and Democratic hostility required buckets of sweat. "The strain and stress associated with achieving this was amazing relative to back in the old days, when we were trying to achieve $500 billion over five years," says Hoagland. "This seems like a terribly heavy lift for such a small amount of deficit reduction."

Cutting spending, particularly entitlements, is always difficult; but the political inefficiency of the 2006 budget cycle set a new standard. Why should it be so much harder for today's one-party Republican government than for divided governments in the Reagan, George H.W. Bush, and Clinton years?

The answer has to do with a critical shift in the Republicans' governing strategy, dating to the late 1990s. From 1981 through 1998, Republican reformers' thinking was dominated by Dave Stockman (President Reagan's first budget director) and Newt Gingrich (the reform-minded House speaker of 1995 to '98). Both were movement politicians who believed that, by cutting spending, Republicans could build prosperity, tame Big Government, and win majority status.

The trouble was that budget cuts brought short-term political backlashes that kept interrupting the program. Burned by President Clinton in 1995-96 and then spanked by voters in 1998, Republicans decided to reverse the sequence. First they would build a political machine; then, once safely entrenched, they would reform Social Security and Medicare, shrink government, and so on. The new course was set by DeLay and Karl Rove, President Bush's chief political strategist—both machine-builders par excellence.

And so, under DeLay and Bush, the Republicans spent generously, even profusely, to build their base. The number of budgetary earmarks increased from 2,100 in 1998 to 14,000 in 2005, according to Citizens Against Government Waste. To disarm the Democrats, the Republicans gave up on reducing entitlement spending and instead dramatically increased it, notably with an expensive new prescription drug program. (According to Richard Kogan, a senior fellow with the Center on Budget and Policy Priorities, the Republicans have added $540 billion to entitlement costs over the 2001-to-2011 period.) They cut taxes and spent heavily on the Iraq war and defense. (Real spending on defense and security has risen by more than 7 percent a year since 2001, Kogan says.)

When, last year, DeLay blurted out that the budget had no fat left, he meant that it had no political fat, and he was right. Every dollar now served a constituent group in DeLay's carefully built machine. Phase one had worked. In 2005, with Bush safely re-elected and their congressional majorities cemented, Republicans launched phase two: a reform effort aimed at Social Security.

Then came a shock. Social Security reform collapsed and spending proved all but intractable, both for the same reason: Large-scale reform needs a popular majority, not just a parliamentary one, and Republicans constitute only a third of the country. In building their machine, the Republicans had made Democrats hostile and independents suspicious, and the support that remained was far from enough.

No one should be surprised that political entrenchment militates against governmental reform. One-party rule always turns reactionary. Still, the 2006 budget cycle is important for three reasons. First, conservatives finally realized they were captives of their own machine. Second, they rebelled, passing a package of entitlement cuts for the first time in eight years. Third, their rebellion proved not how much they could accomplish without Democratic votes, but how little. DeLay's fortress is conservatism's prison.

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Jonathan Rauch is a contributing editor of The Atlantic and National Journal and a senior fellow at the Brookings Institution.

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