Hey, big spenders

Hurricane Katrina arrived amid out-of-control spending, and bipartisan Washington reflexively opened the taxpayers’ checkbook for more than $60 billion without requiring any offsets. Instigated by the conservative Republican Study Committee, a revolt against fiscal recklessness erupted in the House. The Republican leadership says it is now seeking some spending restraint. Better late than never, but as Congress spends this week trying to be a bit less fiscally irresponsible, some perspective is in order.

From the Capitol to the White House, for Washington’s big spenders, who have become the capital’s largest bipartisan group in a generation, it has been quite a party the past six years. Annual federal outlays have soared by nearly $800 billion, rising from $1.7 trillion in fiscal 1999 to $2.47 trillion in the fiscal year that ended Sept. 30.

The $770 billion difference between federal spending in 2005 and federal spending in 1999 is greater than total federal spending during Ronald Reagan’s first fiscal year (1982), when federal outlays were less than $750 billion.

Federal spending in fiscal 2005 was more than 45 percent higher than federal spending six years earlier despite the fact that inflation, measured by the consumer price index, totaled less than 17 percent over the same six-year period. In other words, inflation-adjusted spending increased by nearly 30 percent in six years. Not surprisingly, the last three years of this spending binge were accompanied by the three largest nominal budget deficits in history. Particularly worrisome is the fact that virtually every cent of the last three budget deficits, which totaled $1.1 trillion and averaged $370 billion per year, was effectively financed either by foreign central banks or private foreign investors.

Those spending and deficit trends set the stage for the fiscal year that began Oct. 1. At the height of the spending spree, Congress failed to pass a budget for fiscal 2005. For 2006, without a single Democratic vote in either chamber, Congress narrowly passed a five-year budget resolution in April. The resolution required reducing the projected spending increases on the rapidly rising mandatory entitlement programs by a mere $34.7 billion. (Those entitlements include Medicaid, Medicare, Social Security, Supplemental Security Income, welfare, food stamps and agriculture subsidies.)

Relative to 2005, the cumulative increased spending over five years (2006-10) in mandatory entitlement programs totals about $1.3 trillion. So, the 2006 budget resolution essentially required Congress to reduce the projected increases in entitlement spending over five years from $1.3 trillion to $1.265 trillion. Mandatory entitlement spending in 2010 alone was projected at $450 billion higher than comparable spending in 2005. With Social Security and Medicare essentially off the table, Congress earmarked $10 billion in five-year savings from Medicaid. Federal outlays for Medicaid have been soaring — from $6.8 billion (1975) to $22.7 (1985) to $89.1 billion (1995) to $188.5 billion (2005) — on their way to nearly $275 billion in 2010.

Amazingly, the budget resolution prohibited Congress from achieving any of the $10 billion in five-year Medicaid in fiscal 2006. It is in this context that the newfound restraint among the big spenders must be judged.