The Spending Machine - Why Leviathan keeps growing.

The big debate in Washington this year is whether to pass President Bush's $1.6 trillion tax cut. Critics, and the neutral observers in the press corps, have called that tax cut "huge," "enormous," and "gargantuan." Such adjectives are rarely used to describe Washington's profligate spending over the last few years-even though it now tops $2.3 trillion annually, and is certain to rise even further-because all that new spending has hardly been debated at all.

There's a bipartisan conceit that whenever tax cuts are on the table, there's a danger of a "feeding frenzy" in which politicians one-up each other until the Treasury is empty. The truth, as Wall Street Journal columnist Paul Gigot has pointed out, is that major tax cuts come along once a generation, while spending climbs every day. The rules of the game in Washington ensure that tax cuts are a matter of intense deliberation, while spending goes up on autopilot.

Consider the fate of the "spending caps" that President Clinton and Congress agreed to in the grand, bipartisan budget deal of 1997. That deal, like the budget plans of 1990 and 1993, raised spending in the short term but was supposed to restrain it in the long term. The long term never came, again in keeping with tradition.

At first Congress overspent by only a few billion dollars. But extra spending in one year has the practical result of raising spending in all future years, since agencies would protest bitterly if the funds were cut. Actually, it's worse than that. The convention inside the Beltway is to measure spending against a "current-services baseline": If a program doesn't receive what it got last year plus money to cover inflation and population growth, its funding is said to have been "cut." Extra spending in 1997, then, meant even more spending in 1998. When Congress proceeded to add to this total in 1998, and again in 1999. . . . well, pretty soon the spending caps were far behind. The caps are still in law. But by now, in 2001, adhering to them would mean cutting federal spending (on everything except Social Security and Medicare) by $100 billion in one year. No way that's going to happen.

And that's how the federal government has managed to commit itself to spending $2.3 trillion more, over the next ten years, than it said it would in 1997. That works out to $17,991 for each of America's 124 million tax filers. Another way of looking at it: If the feds had obeyed their own law, we would have saved enough money to declare a two-year holiday from all federal income taxes. Instead, all that money is being spent.

While spending has proceeded at a particularly brisk pace, thanks to the huge runup in revenues since 1997, it has been out of control for over 30 years. There are, of course, many reasons it has been impossible to restrain. Entitlements are popular. And the beneficiaries of a program almost always have a stronger interest in its expansion than the general public has in stopping its expansion.

But some peculiarities of the budget-writing process also contribute to the problem. For one thing, the "budget resolution" passed by Congress and signed by the president in the spring is not binding on the spending they do in the fall. Nobody is responsible for staying within budget. Instead, 13 "appropriations subcommittees" of Congress write separate bills funding different parts of the government. The chairmen of the subcommittees are more powerful the more money they control, so each one has an incentive to spend as much as possible-especially since the other chairmen will spend the money if he doesn't. The result is, to coin a phrase, a feeding frenzy.

It doesn't help that the chairman of the Senate Budget Committee, who in theory should be trying to impose some discipline on spending, has in recent years been Pete Domenici, who is also chairman of one of the appropriations subcommittees. When he threatens to enforce the spending caps, the chairman of the full Appropriations Committee, Ted Stevens, can retaliate by insisting that a disproportionate share of the cuts come from Domenici's bill. So Domenici typically spends the first half of the year asking for restraint and the second half joining the orgy.

The appropriators play games to keep spending high. A common tactic is to invoke an "emergency," since emergency spending doesn't fall under the caps. Another maneuver is to have the House versions of some of the bills be cheaper than the Senate versions, and vice versa on the other bills. In each chamber, fiscal conservatives can be told that the total cost is reasonable. Then, at the last minute-especially in an election year, when congressmen are anxious about getting home to campaign-each House-Senate pair will "compromise" in favor of whichever version is higher.

Appropriators also run a bait-and-switch on defense spending. They often say that the spending caps have to be busted to provide more money for the military, but defense keeps getting the short end of the stick. Last year, for example, defense rose by 2.2 percent while social spending rose by 7.2 percent-the largest increase since LBJ was president.

The budget-writing process is biased, overall, against defense. Defense programs have to be authorized in law before money can be spent on them. Domestic programs, on the other hand, can be funded without such authorization. The Legal Services Corporation, for example, has been able to get funding even though its authorization expired in 1980. If its supporters had to pass legislation reauthorizing it, they would have to accept amendments that would reform it and save money. As it stands, they can stick the funding for it in a huge bill containing goodies for everyone.

The amount that the federal government spends is, of course, only one index of its size. Arguably, conservatives should be more concerned about how many responsibilities it assumes. They should be happier to eliminate some programs outright, even if the dollar savings are small, than to shave costs everywhere. In the long run, abolishing programs saves more money anyway-as long as they're around, they can be increased.

But nobody, least of all President Bush, is talking about terminating federal programs. Indeed, Bush has promised to create a few new ones. In that context, it's all the more important to keep federal spending down.

The good news is that Bush is committed to doing that. He has said that he thinks last year's spending was excessive. He proposes to let spending increase by 4 percent this year. Some conservatives grumble that 4 percent is too much. But Bush will be lucky if spending doesn't rise more than that by the time the appropriators are done in the fall.

Already, Republican appropriators are complaining that they need more money. When the administration talked about giving the National Science Foundation a 1 percent budget hike, New York Republican congressman Jim Walsh wrote to protest its stinginess. Never mind that the program got a 13 percent hike just last year. When the administration talked about cutting funds for the Federal Aviation Administration, both the senior Republican and the senior Democrat on the relevant House committee complained. The Democrats' sketchy alternative budget, meanwhile, appears to commit an extra trillion dollars of the ten-year surplus to new spending. They will find a way to present any Bush proposals that fall short of that as draconian cuts.

Jim Nussle, chairman of the House Budget Committee, says that Bush's 4 percent plan is "reasonable" and has a good chance of getting through the House. But he admits that the Senate is another story-and that's before the fall appropriations season starts. Mitch Daniels, Bush's budget director, promises/threatens that Bush will veto appropriations bills that bust the budget. But that strategy will probably be as effective as beating a sword against the waves to turn the tide.

In the long run, budget restraint would be better served by reforming the budget process than by fighting over a few billion dollars in the fall. Making the spring budget resolution binding, with caps set for each of the 13 spending bills and a special vote required to break them, would be a start. Another useful reform might be to let tax cuts be introduced as part of appropriations bills. That way, when government funds were being proposed for some worthy cause, conservatives would be able to make a counterproposal to let individuals and families rather than the government spend money for that cause. As it stands, all too often conservatives who oppose government spending on some cause are easily painted as opponents of the cause itself.

To achieve such reforms would require taking on the appropriators and the lobbies that benefit from their spending. Short of that, is there anything Bush can do? Yes. Over the last four years, the rate of growth of discretionary spending has risen in tandem with the budget surplus. As Alan Greenspan recently testified, "With the advent of surpluses, the budget controls broke down badly." If Congress is going to spend any surplus available, he has consistently said, it would be better to cut taxes so that the money never reaches Washington in the first place.

One of the arguments liberals make against Bush's tax cut is that it depends on unrealistic assumptions of spending restraint. (In other words: We won't cut spending, so you can't cut taxes.) They've got the story backwards: Tax cuts are the only realistic way to achieve any spending restraint.