February 18, 2004
The spending priorities outlined in
President Bush's budget certainly reflect his claim of being a
"wartime" president. Since
2001, homeland security is the
fastest growing component of discretionary spending .
Defense receives 85 percent of the budget's increase in discretionary
spending for the new fiscal year.
The large discretionary gains in
international assistance programs, state department activities, and veterans
affairs also could be related to the "war on terrorism".
However, there is a little butter with the guns.
Education, housing and urban development, and NASA also have significant
dollar gains in the discretionary portion of the budget.
Of course, looking at dollars allocated is
not sufficient to determine if the people's money is being spent wisely.
Will the reduced growth in military pay maintain the quality of recruits
needed in our volunteer force? Are
we addressing the personnel problem developing in our reserves?
Are we spending money on intercepting ballistic missiles and not on
improving the monitoring of international nuclear trade?
A quick examination of the dollar
allocations in the budget cannot answer those critical questions.
Also, some spending responds to temporary conditions.
For example, the decline in the budget for the Department of Agriculture
reflects more the improvement in the farm economy than a reduction in
However, an examination of the dollar flows
over the four years of this administration's budget presentations reveals some
shifts in governmental direction. For
example, the largest percentage decline in discretionary support for any agency
during the four year period is the small business administration.
Perhaps there are loan programs that were terminated because they could
not be justified. Nevertheless, such a large decline (almost 25 percent in four
years) suggests that small business development is not a Bush concern.
Other big budget declines are in the Corps
of Engineers, the Department of Transportation, the Environmental Protection
Agency, and the Department of Labor. Given
a recession and the transitional problems faced by outsourced jobs, this latter
cut may be the unkindest of all.
I will grant that the administration
believes providing tax incentives is preferred to spending programs.
Thus, part of the decline in small business support could be explained by
faster expensing of equipment for small businesses.
(Of course, to take advantage of that, businesses must have taxable
While there are some tax deduction
initiatives for environmental programs, the one that allows businesses,
including the self employed, to expense large SUVs can hardly be called an
environmental tax initiative. In
fact, there are $1.2 billion of revenues projected for 2006 from leases on the
Arctic Wildlife Refuge. Clearly,
the environment does not have the same priority it once did.
Although the discretionary budget more
clearly shows administration spending priorities, it has become a small
percentage of the total budget. By
2009, the nondefense discretionary budget will be less than 17 percent of
government outlays according to administration projections.
While social security is projected to grow
by 29 percent in six years, the largest growing program is interest on the debt.
Both an explosion of borrowing and an increase in interest rates will
virtually double those interest payments.
The virtuous cycle of falling debt and
interest rates in the last administration has been replaced by a vicious cycle
of interest payments that will grow by $146 billion in six years.
As mentioned last week, economic growth will not be sufficient to control
this need for new debt.
The new prescription program and additional
expenses for medical services outside of the veterans administration also are
budget killers. Medicare's growth
is nearly 70 percent while Medicaid programs will be growing 52 percent.
(As the budget does not show explicitly its medical inflation
assumptions, I cannot determine how reasonable these already very large gains
When state medical programs and the medical
benefits programs of all government workers are considered, more than half of
all medical services will be purchased by some governmental entity by the end of