Quite an economical plan they’ve got running over there…
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MOST people only have to see the word Medicare and they turn the page. Please resist, just this once. There are few better ways of understanding America’s emerging Republican establishment than studying the two Medicare bills that are currently working their way through Congress.
These bills point to two conclusions that are worth pondering by people who don’t give a fig about co-payments. The first is that the Republicans are mighty shrewd when it comes to short-term political manoeuvring. The second is that they are almost completely indifferent to the basic principles of sound finance.
Start with the politics. Ever since Lyndon Johnson introduced Medicare in 1965 as one of the edifices of his “Great Society”, Democrats have been taunting the Republicans as hard-hearted *******s who don’t give a damn about the elderly. What better way to shut the Democrats up than a new $400 billion drugs benefit? Congress still has to reconcile the Senate and the House versions of the bills, a procedure that could take until the autumn. But few people doubt that the law will eventually pass—and that Mr Bush will enthusiastically sign it. This will also reinforce the Republicans’ claim that they are better at getting things done than Democrats (who, in Republican lore, ran Congress for decades without doing anything about drug prices
Nice Bill Frist, the do-gooding doctor who replaced Trent Lott as Senate majority leader, will be able to boast that he has passed a major Medicare reform within a year of taking up the job. Mr Bush will be able to go into the next election armed with yet more proof that he is both a “compassionate conservative” and a “reformer with results”—a man who has not only toppled the Taliban and Saddam Hussein but also reformed education and Medicare. Republicans are already bragging that Mr Bush’s embrace of Medicare reform is the same as Bill Clinton’s embrace of welfare reform back in 1996—a manoeuvre that magically transforms a liability into a strength.
There is, however, one tiny difference. Welfare reform was an admirable policy that led to a sharp reduction in welfare rolls. Medicare reform is lousy policy. The Republicans have given up any pretence of using the new drug benefit as a catalyst for structural reform. They are doing nothing to control costs or to target government spending on people who really need it. They are merely creating a vast new entitlement programme—a programme that will put further strain on the federal budget at just the moment when the baby boomers start to retire.
This might be tolerable if the Medicare boondoggle were an isolated incident. But it is par for the course for this profligate president. Every year Mr Bush has either produced or endorsed some vast new government scheme: first education reform, then the farm bill, now the prescription-drug benefit. And every year he has missed his chance to cut federal pork or veto bloated bills.
As Veronique de Rugy of the Cato Institute points out, federal spending has increased at a hellish 13.5% in the first three years of the Bush administration (“he is governing like a Frenchman”). Federal spending has risen from 18.4% of national income in 2000 to 19.9% today. Combine this profligacy with huge tax cuts, and you have a recipe for deficits as far ahead as the eye can see.
Why has the self-proclaimed party of small government turned itself into the party of unlimited spending? Republicans invariably bring up two excuses—the war on terrorism and the need to prime the pump during a recession; and then they talk vaguely about Ronald Reagan (who sacrificed budget discipline in order to build up America’s defences).
None of this makes much sense. The war on terrorism accounts for only around half the increase in spending. The prescription-drug entitlement will continue to drain the budget long after the current recession has faded. As for Mr Reagan, closer inspection only makes the comparison less favourable for Mr Bush. The Gipper cut non-defence spending sharply in his first two years in office, and he vetoed 22 spending bills in his first three years in office. Mr Bush has yet to veto one.
Ronald Reagan wouldn’t
The real reasons for the profligacy are more depressing. Mr Bush seems to have no real problem with big government; it is just big Democratic government he can’t take. One-party rule, which was supposed to make structural reform easier, also looks ever less savoury. Without a Congress that will check their excesses, the Republicans, even under the saintly Dr Frist, have reverted to type: rewarding their business clients, doling out tax cuts and ignoring the fiscal consequences.
This opportunism may win Mr Bush re-election next year, but sooner or later it will catch up with his party at the polls. The Republicans are in danger of destroying their reputation for managing the economy—something that matters enormously to the “Daddy Party” (which sells itself as being strong on defence and money matters). The Democrats can point out that Bill Clinton was not only better at balancing the budget than Mr Bush. He was better at keeping spending under control, increasing total government spending by a mere 3.5 % in his first three years in office and reducing discretionary spending by 8.8%.
The Republican Party’s conservative wing stands to lose the most from this. Some conservatives credit Mr Bush with an ingenious plan to starve the government beast: the huge tax cuts will eventually force huge spending cuts. But this is rather **like praising an alcoholic for his ingenious scheme to quit the bottle by drinking himself into bankruptcy. ** There is no better way to stymie the right’s long-term agenda than building up the bureaucracy (government being a knife that only cuts leftwards). And there is no better way to discredit tax cuts than to associate them with ballooning deficits. For the moment Mr Bush is still the conservatives’ darling. Will they still love him a decade from now?
http://www.economist.com/printedition/displayStory.cfm?Story_ID=1893625
I am all fall one man/one vote but people in the US need to wake up and realize that their version of America is quickly changing (for the better) and unless they get their heads out of their asses, they will be searching for tubers along with the other specimen at the state parks.