By most accounts, the Bush Administration believes "deficits don't matter." Former Office of Management and Budget Director Mitch Daniels expressed such sentiments, and supposedly Vice President Dick Cheney -- to the extent that Paul O'Neill can be believed -- claimed that "Reagan proved" that they don't matter. It is this type of thinking which has gotten Bush into some trouble that could affect his re-election prospects
There are two ways to interpret the claim that deficits don't matter: economically and politically. For the time being, I'll leave the former to economists. Since it is an election year, the relevant question is can deficits hurt a president's reelection bid? Many conservative pundits don't think so. Typical is Ramesh Ponnuru who writes, "Do deficits inflict political damage on the people who get blamed for them?… I think the answer … is no." While that may be generally true, it is not always true. The Bush camp seems to be forgetting 1992, when Ross Perot rode the issue to a 19% finish in the election, possibly leading to the defeat of Papa Bush. It may only take one eccentric billionaire to rain on the Bush parade.
Or it might only take the Democratic presidential nominee exploiting the deficit issue in the fall. Of course, all of the Democratic candidates have big spending plans of their own, thus diminishing their credibility on the issue. Yet the results in Iowa and New Hampshire show that Democratic voters are not stupid -- they are not willing to let a loose cannon like Howard Dean take the party off a cliff. Thus, they may be astute enough to support a nominee who dumps spending plans in favor of deficit reduction if it would mean taking back the White House. It might not be overly difficult for the eventual nominee to persuade the Democratic rank-and-file to accept such a plan: a recent ABCNews/Washington Post poll showed that 52% of respondents disapprove of Bush's handling of the deficit.
The Republican base might even make the Democrats' task easier. For many conservatives in the GOP, the deficit is symbolic of runaway government spending. A recent conference of the Conservative Political Action Committee was beset with grumbling about Bush's out of control spending. At that meeting, talk radio host Kay Daly claimed that the complaining has gotten worse over the last year. "Bush has got to watch out," she warned, "or conservatives may stay home" in November.
PERHAPS KARL ROVE HAS GOTTEN the message. The recent budget proposal released by the Bush Administration limits non-defense, non-homeland security discretionary spending to 1%. That's a good start, but one that will likely prove ephemeral. The Fiscal Year 2005 budget is supposed to be finished on September 30, 2004, barely four weeks before the election. Few things whet Congress's appetite for spending more than an election.
Yet there are other things that President Bush can do that would both help him neutralize the deficit issue, and rein in spending in the long-term. Given that the ideas come from conservatives, adopting them would help him shore up that part of his base. Bush should send a proposal to Congress that includes:
• Reforming the Budget Process. In the current process, the budget must be due just a few weeks before the election during election years. This undoubtedly increases the pressure to spend, as members of Congress hope to shore up voter support by bringing home the pork. Bush should propose switching to a budget process that yields a two-year budget that must be finished during a non-election year.
• Audit Reform. Rep. Pat Toomey has suggested making federal agencies subject to annual audits. If an agency can't pass the audit -- and there are many that cannot -- it gets no spending increase in the next year. That would give government agencies considerable incentive to cut down on the waste, fraud, and abuse.
• Sunset Federal Programs. Stephen Moore of the Club For Growth has proposed that all federal programs should be sunset every five years. They would then be subject to review to determine if they merit continued funding. I would add that this reform must stipulate that each decision on whether to continue funding a program must be voted on separately. In other words, Congress would not be allowed to muster support for continued funding by bundling the decisions on each program into one bill.
It appears that the Bush Administration assumed that the Republican base would be content with a strong defense and tax cuts. It is increasingly clear that was a miscalculation. Proposals like those listed above could help him to shore up his base. They would have the added benefit of putting the Democrats on the defensive, requiring the eventual nominee to come up with his own deficit reduction proposal. It's not too late for Bush to right the course on spending. Are you listening, Mr. Rove?