Restore The Fiscal Golden Rule: Attack Weak Claims, Not Weak Clients

Fiscal retrenchment has long had a bad name in the mainstream press because Washington budget politics militate against wielding the knife on programs impacting powerful lobbies. That leaves mostly dribs and drabs of so-called “safety net” programs to be featured on the fiscal butcher’s bill. At length, therefore, “cuts” end-up being synonymous with small extractions from programs for poor people and other motherhood pieties, even as the public debt grows skywards.

Needless to say, that’s upside down. The place to find meaningful fiscal savings is in the massive waste of the Warfare State and trillions of tax loopholes and subsidies which go to business interests and wealthy taxpayers. But what might be called the Willie Sutton principle, per the infamous criminal who explained that he preferred to rob banks because “that’s were the money is”, doesn’t cut it on the banks of the Potomac.

Thus, abuses and the sometimes unjustified sweeteners which creep into transfer payment programs get occasionally pared back, but the real excess and waste in the Federal budget always and everywhere tends to escape these episodic moments of tepid fiscal sobriety on Capitol Hill.

Back in the Reagan days, for example, we tabled a whole array of work-requirement oriented reforms to food stamps and cash welfare (then AFDC) and a tightening of means-testing so that, for instance, affluent families wouldn’t get free school lunches and Pell grants. But we also paired this with deep reductions in some really bad programs that had no justification whatsoever including the oil depletion allowance, subsidies for synthetic fuels, multi-million-dollar crop support payments to wealthy farmers and subsidized Export-Import Bank loan guarantees for the likes of Boeing, General Electric and Caterpillar.

In the cutting room where the Reagan plan to drastically shrink the Leviathan on the Potomac came together, in fact, we had a policy maxim which provided the over-arching rationale and consistency principle for this whole endeavor. To wit, attack weak claims on the public purse, not weak clients on account of their political vulnerability.

Alas, our successes in attacking weak claims were few and far between. The oil depletion allowance repeal never made it out of the Oval Office, zeroing-out the Ex-Im Bank was shouted down by the GOP exporters’ caucus on Capitol Hill and farm subsidy curtailment got a loud bipartisan Bronx Cheer in the Agriculture Committees. And it was probably only a fortuitous decline in the high oil prices of the late 1970s that enabled Uncle Sam to finally dry-up the funding for white elephant synfuels plants which were being built on the taxpayer’s dime by Shell, Exxon and others.

When all was said and done, therefore, nothing much changed. The inherited nondefense budget amounted to 16.6% of GDP in 1981 and ended up at 16.5% of GDP at the end of the Reagan-Bush era (FY 1993).  In the interim, spending cuts got a bad name, the Cold War ended but big defense budgets didn’t, and the interest cost on the soaring public debt, even flattered by artificially low interest rates thanks to the Fed’s aggressive money-printing, is once again claiming a record 3.0% of GDP.

Worse still, the weak claims still abound. Take what amounts to the “Bank of Boeing”, aka the Export-Import Bank. It’s still around, having shrugged off our challenge in the early 1980s and another run by a remnant of intrepid fiscal conservatives in the U.S. House after 2014. Alas, the latter challenge ended-up a cropper, too, when in the 2017-2020 period the man who rode into Washington vowing to Drain the Swamp ended-up saving the Ex-Im’s bacon.