Memo to Congressional Leaders

The Washington Post, of all publications, confirmed what we already knew: Congress has been on a spending binge of historic proportions. In fact, the closest historic precedent is Lyndon Johnson’s “Great Society.” Hill leaders should remember that his policies led to:

1: stagflation

2: the ascendancy of the modern conservative movement

The rush to spend the surplus began under Bill Clinton and it remains tempting to lay the blame on his policies and tactics. But Republicans need to remember that they are in control, and therefore held responsible, no matter who’s to blame. Additionally, Bud Shuster was a Republican and he brought a lot of Republicans along with him on his massive pork-barrel transportation bill that the Washington Post documents as one of the main causes of the spending spree. Further, Republican appropriators actively worked to increase government spending every year, at every step in the process.

Bad policy and bad politics

The rapid increase in the size of government comes with a potentially huge cost to the conservative policy agenda. We need to make the Bush tax cut permanent. If the American economy is going to reap the real and lasting rewards of reductions in marginal rates, they must be made permanent. I can’t name an economist or politician who thinks it makes sense to temporarily repeal the Death Tax — it must be permanently repealed or else it is virtually meaningless. Yet, if politicians in both parties who want to increase spending continue to win out every year, government will need to find a way to pay for all that spending. Spending puts tax cuts at risk.

While Congress made the tax cut temporary, spending programs seem to go on and on. With the baby boomers set to retire in about decade, the federal government needs to save and reform Social Security. Conservatives, led by President Bush have stepped up to the plate and proposed personal retirement accounts as part of the solution. Yet, big spending increases in other areas of government crowd out resources needed to save Social Security and finance transition costs to a new system — making tax increases, not tax cuts, more likely in the future.

Conservatives also want to reduce government regulation. Yet, when government increases spending, it inevitably increases regulations. Spending always comes with strings attached. For example, with the huge increases in transportation spending, more of the national economy falls under Davis Bacon mandates, meaning taxpayers pay inflated prices and union political coffers grow.

In short, conservatives are allowing Republican appropriators to step on their domestic policy agenda.

If all this new spending made good political sense, perhaps conservatives should think about grinning and bearing it all. But the political gains are incremental and the political costs are huge. Republicans are the party of lower taxes. When Republicans undermine the case for lower taxes by advocating big spending increases, they undermine their own political position. Additionally, they turn-off their base, who show-up at elections, volunteer, and provide the winning margins in close districts.

The Democrats still blast the Republicans for “slashing” spending, so how much political credit have Republican appropriators bought for their party? Little if any.

Mitch Daniels is wearing the White Hat

The Office of Management and Budget Director, Mitch Daniels has taken an unusual amount of abuse from politicians of his own party on the Hill. He’s not involved in a scandal. He hasn’t defied his President. Instead, he had the temerity to suggest that Congress is spending too much money and for that, one leading Republican Senator suggested that Mitch Daniels should consider moving back to Indiana.

President Bush and Director Daniels calls for some fiscal restraint should be a rallying call for Republicans. It should help define the domestic debate with Republicans speaking from a consistent, unified voice that reflects the values and beliefs of their philosophy. Republican appropriators have instead chosen to make modest fiscal restraint the focus of their ire and attacks. It is bad policy and bad politics.

When even the Washington Post finds the size of the spending increases newsworthy and a cause for concern, then it clear that we have a big spending problem.

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