Bush Cuts the Budget

Bush Cuts the Budget

Bush Cuts the Budget

Politics and policy.
April 11 2001 6:45 PM

Bush Cuts the Budget

George W. Bush contends that he can pay for his tax cut by cutting wasteful spending. "Washington's known for its pork," he said in announcing his plan. "This budget funds our needs without the fat." Dick Cheney says Bush will veto any "porked-up" appropriations bills passed by the Republican Congress. Such rhetoric is so familiar--and so discredited by recent Republican history--that it's hard to take it seriously. Bush is up against a long line of presidents who campaigned against "waste, fraud, and abuse" but left behind more of it than they found. Still, a new president deserves the benefit of the doubt--as does the new combination of a GOP president and a GOP-controlled Congress. Could Bush be serious about paring back unnecessary federal spending?

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The president's budget itself doesn't address the topic of waste directly. However, the director of Bush's Office of Management and Budget, Mitch Daniels, has been explicit in his criticism of the most familiar kind of pork-barrel spending, the congressional practice of attaching "earmarks" to appropriations bills. The organization Citizens Against Government Waste says that there were 6,300 of these goodies last year and that they cost taxpayers some $18.5 billion. Without naming any names, Daniels has proposed eliminating about half of them, which he says would save some $8 billion a year. Unfortunately, Bush will never succeed in cutting that much Washington pork. The president can't veto a major appropriations bill just because he doesn't like the fact that it includes a few hundred thousand dollars to renovate a courthouse lobby or beautify someone's favorite highway. The best he can hope to do is persuade the committee chairmen to take it easy on the sauce.

A much larger and potentially more promising category of reducible government waste is what is sometimes called "corporate welfare." These are programs that exist primarily to benefit profit-making businesses. Most estimates put their cost in the range of $60-$70 billion a year. If Bush is serous about finding substantial savings in the $2 trillion federal budget, this is the place to start.

Will Bush go after this type of waste? One way to judge is to compare his budget proposal to the Cato Institute's list of the 12 worst corporate welfare programs. Cato is a libertarian group that tends to oppose most government functions beyond patrolling the coastline and keeping rapists off the street. But it has drawn up a good list of programs with little in the way of principled justification. If you really want to cut the federal budget, this is the stuff that's relatively easy:

1. Market Access Program (Agriculture Department)
This is a program that funds promotion and advertising on behalf of agricultural products. The money goes to organizations like the California Pistachio Commission, the Catfish Institute and the National Watermelon Promotion Board. Bush, who considers farmers an important constituency, actually increases MAP spending from $86 million in Fiscal Year 2001 to $92 million in 2002.

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2. Advanced Technology Program (Commerce Department)
A research subsidy for companies like IBM and Motorola. Bush's budget proposal would phase it out entirely over the next several years by ending new grants. Funding drops from $132 million this year to $80 million next year.

3. Dual Use Applications Program (Defense Department)
This program, formerly known as the Technology Reinvestment Project, funds the development of military technologies that may have civilian spin-offs. In other words, it's a subsidy for commercial products. It used to be much bigger but has been scaled back already to $36 million. Bush's budget defers the question of what to do with it.

4. Export Enhancement Program (Agriculture Department)
The theory of this program is that European governments subsidize domestic agricultural producers, so our farmers need an export subsidy in order to compete effectively in foreign markets. Never mind that our government subsidizes agricultural production in many of the same ways the Europeans do. Bush leaves funding where it is, at $478 million. Because there's no adjustment for inflation, you could argue that this amounts to a tiny cut. 

5. Maritime Administration Operating-Differential Subsidies (Transportation Department)
This program subsidizes U.S.-flagged ships with operating costs higher than those of foreign ships. The idea is making sure we maintain a U.S. merchant fleet. Bush reduces these subsidies from $107 million this year to $66 million by phasing out one of the two major categories of subsidy.

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6. Partnership for a New Generation of Vehicles (Energy Department)
This program funds efforts by the big three U.S. automakers to build a car that gets 80 miles per gallon. A billion dollars and several concept cars later, the average fuel-economy of U.S. cars is worse than it was in 1993 when the program started. Meanwhile you can actually buy a Honda Insight, a hybrid gas-electric car that gets 68 miles per gallon (Actual results may vary. See your Honda dealer for details.) The budget reduces funding for the PNGV from $261 million to $239 million.

7. Export-Import Bank
This outfit makes loans to exporters and purchasers of U.S exports. Such subsidies are said to "support American jobs." Which they do--in much the same way that simply donating several hundred million dollars directly to General Electric would support American jobs. Bush would reduce funding significantly, from $925 million to $698 million.

8. Overseas Private Investment Corporation
An agency that encourages investment in emerging markets by selling insurance against political risk, allegedly at no cost to the government. Bush would reduce its funding from $47 million to $23 million.

9. International Trade Administration (Commerce Department)
Yet another agency that helps U.S. companies compete abroad by working to lower trade barriers, promoting trade fairs, and giving them money to comply with foreign trade rules. Bush actually increases funding from $305 million to $321 million. 

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10. Small Business Administration (Commerce Department)
The SBA lends money to concerns that get turned down from banks. Bush obliquely criticizes this function in his proposal: "The 2002 Budget recognizes that some small businesses may have trouble accessing capital but by increasing fees, the budget does not require the Government to subsidize their cost of borrowing." The administration would reduce funding for the SBA from $937 million to $541 million.

11. Energy Supply Research & Development Program (Energy Department)
Funding for research into more efficient energy production. Bush would cut funding for most of the green efforts, such as solar and wind power, while increasing funding for "clean coal" technologies. In other words, he would reward an industry that supported him in the 2000 campaign at the expense of the enviros. Overall, Bush would reduce the program slightly, from $2 billion to $1.9 billion.

12. Agricultural Research Service (Agriculture Department)
This program pays for scientific, technical, and market research that makes farming more profitable. Bush cuts modestly, from $989 million to $946 million a year. 

According to Stephen Slivinsky, a fiscal policy analyst at Cato, the total cost of these 12 worst subsidies is around $6.3 billion per annum. Bush's budget would reduce them by about $1 billion, to $5.3 billion.

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So is that a good start or a cop out? On the one hand, Bush has proposed genuine cuts in some fairly worthless programs. Stephen Moore, another anti-spending conservative, praises his budget proposal as "moderately tight-fisted." On the other hand, Bush hasn't made a big point of arguing that the government shouldn't subsidize the private sector (possibly because he has never really believed it shouldn't). Bush has yet to use the incendiary but useful term "corporate welfare." Without leading a crusade, it seems unlikely that he will achieve much in the way of real cuts since all of the programs he targets have beneficiaries in his party and defenders in Congress.

The larger reason for skepticism about Bush's budget-slashing is his failure to propose cuts adequate to his agenda. If you look at the historical tables that accompany Bush's budget, you see that he proposes to reduce "on-budget" spending over the next five years to 13.6 percent of GDP--a level last seen in the late 1940s. But he hasn't proposed the kind of specific reductions that would bring us anywhere near that level. Meanwhile, he has promised large increases in spending on education and the military, as well as for a new prescription drug benefit for the elderly, and a new system of private retirement accounts, and so on. After all that, there's supposed to be enough left over to fund a massive tax cut and pay down half the national debt.

What does one call that kind of budgeting? In the days before fuzzy math, it was known as Reaganomics. 

Photograph of George W. Bush on the Slate Table of Contents by Win McNamee/Reuters.