The budget-cutter who couldn't cut.

The budget-cutter who couldn't cut.

The budget-cutter who couldn't cut.

Moneybox
Commentary about business and finance.
May 6 2003 5:33 PM

Dull Blade

Farewell to OMB Director Mitchell Daniels, the budget-cutter who couldn't cut.

Hacking at weeds while deficits bloom
Hacking at weeds while deficits bloom

And then there were none. Mitchell Daniels, the director of the Office of Management and Budget and the last remaining original member of the Bush economic team, announced today that he would resign, probably to run for governor of Indiana.

Daniels will leave Washington with his undeserved reputation as a hard-edged fiscal tightwad intact. His admirers like to tell the story of how he once fished loose change out of a toilet. President Bush nicknamed Daniels "The Blade" for his alleged budget-cutting zeal, and he may have kept a samurai sword in his office. But Daniels used that sword primarily to hack at weeds, even as deficits grew to the sky.

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From the outset, Daniels has been more attached to the Bush team than any particular economic principles. He doctored budget numbers in the summer of 2001 so it seemed as if the administration wouldn't have to dip into the Social Security trust fund. And as the fiscal situation eroded in 2001, his OMB disseminated overly optimistic projections that helped downplay the fiscal impact of the president's proposals.

To his credit, Daniels intended to combat the rampant spending growth that had taken root in the late '90s. He seemed to relish being the administration's designated noodge. He loved talking tough. He mused about playing "You Can't Always Get What You Want" to callers on hold at OMB. Early on, he loudly turned down Donald Rumsfeld's requests for a massive Pentagon spending increase and deep-sixed a Federal Emergency Management Agency request for extra disaster relief in the president's home state of Texas.

But after Sept. 11, as "homeland security" became a catchall for both new unfunded mandates and pork-barrel spending, Daniels' cost-cutting efforts increasingly backfired. He justifiably earned opprobrium when, after New York's representatives tried to hold Bush to his promise of $20 billion in aid, he accused them of playing "a little money-grubbing game." Then he needlessly picked fights with free-spending appropriators on both sides of the aisle—notably Sens. Robert Byrd, D-W.Va., and Ted Stevens, R-Alaska.

But even as Daniels grabbed nickels and dimes, he did little to stop the mass splurge of Congress and his boss, the president. He was the designated budget-cutter for a president who had no intention of cutting the budget—a teetotaler riding shotgun in a car driven by a drunk. Congress continued to spend more. And President Bush approved every dollar of it.In fiscal 2002, overall spending rose 8 percent. And in this fiscal year, including the $80 billion supplementary war-spending bill passed in April, spending is slated to rise another 11 percent.

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Discretionary spending—which is under the direct control of Congress, and theoretically under the influence of the administration—accounts for much of the spending growth. According toBrian Riedl, federal budget analyst at the Heritage Foundation, overall discretionary spending rose 13 percent in 2002 and will jump 21 percent in fiscal 2003, to $885 billion.Yes, the Pentagon accounts for a lot of that increase. But in Bush's first two budgets, according to Riedl, even non-defense discretionary spending has risen from $320 billion to $421 billion.

Daniels made a particular point of coming down hard on earmarks—the budgetary vehicles that members of Congress use to drive pork to their districts. But earmarks too have soared in the past two years. According to Riedl, in fiscal 2003 there were 9,000 earmarks worth $22 billion, up from 6,500 in 2001.

It is tempting to lay all the blame for the rapid return to deficits on the free-spending congressional Republicans who control the purse strings. But in Washington, it takes two branches to spend money. And Daniels was largely silent when the president signed off on huge new spending programs, whether it was for defense of the homeland or for the defense of the Republicans' rural base. (One of the largest single pieces of new spending enacted in 2002 was the new farm bill backed by the administration. Cost: $180 billion over 10 years.)

It's a sign of Daniels' rhetorical vigor that he repeatedly threatened a presidential veto to thwart spending. It's a sign of Daniels' actual powerlessness that President Bush never used the veto. The Blade is leaving Washington less samurai sword than butter knife.