- The Washington Times - Sunday, October 27, 2002

The Bush administration announced Thursday that the federal deficit totaled $159 billion for fiscal 2002, which ended Sept. 30. Predictably, congressional Democrats and their allies expressed anguish. Typically, as well, they missed the bigger picture.
In the first place, a deficit of $159 billion represents a relatively paltry 1.5 percent of $10.5 trillion in gross domestic output (GDP), which is the measure of the nation's total economic output.
Secondly, it should hardly be surprising that the budget would move into deficit during four quarters (October 2001-September 2002) of below-potential growth that followed three quarters (January 2001-September 2001) of falling GDP. Given that the Clinton-Gore administration bequeathed its successor a negative growth rate that began even before President Bush took the oath of office, it is strange for House Minority Leader Dick Gephardt to assert that "Republican economic policies have failed to promote economic growth." In fact, it is well-nigh impossible to find any respected economist who would not agree that the fortuitous timing of the Bush administration's countercyclical tax-relief program last year was virtually unprecedented in the annals of postwar economic policy.
Third, the $159 billion deficit wasn't even the most important number released Thursday. Arithmetically, of course, the deficit merely represents the difference between federal spending and federal tax receipts. The more ominous development was the fact that federal spending for the first time in history exceeded $2 trillion, coming in at $2.012 trillion for fiscal 2002.
In fact, federal spending has been exploding since 1999. During the four years from 1995 to 1999, annual federal spending increases averaged $46 billion, ranging from $40 billion in 1997 to $52 billion in 1998. Revenues, however, were rising much faster. Annual federal revenue increases during the same period averaged $119 billion, sparked largely by the capital-gains tax receipts generated by the Clinton-Gore stock-market bubble.
With revenues pouring into Washington, the pols did what they do best: They opened the spending spigots. In 2000, federal spending increased by $86 billion. The next year, it rose by another $76 billion. In fiscal 2002, when federal outlays exceeded $2 trillion, spending was an astonishing $148 billion higher than the previous year. The increase in total federal spending for 2003 is expected to approach $150 billion once again. That will mean that federal spending will have increased by nearly $500 billion in four years alone, or two-and-a-half times the rate of increase during the previous four years.
Stephen Moore, president of the Club for Growth, put these recent spending increases in stark perspective in a recent essay in National Review, observing, "Just the one-year increase in Uncle Sam, Inc., will be more than twice the amount of capital raised in a typical year by the entire venture-capital industry." Mr. Moore also noted that the projected increase in federal spending for 2003 does not yet account for a prescription-drug benefit for the elderly that will eventually be enacted, costing a minimum of $30 billion per year and amost certainly much more.
For all the anguish Mr. Gephardt expressed over the return of budget deficits, his reflexive response has been to propose a massive increase in federal spending. Telling us in a recent speech that he wished to "lay out some fresh ideas," Mr. Gephardt proceeded to outline a typical Democratic spending spree that would pour $25 billion of federal funds into local school construction, another $25 billion for state infrastructure projects and an additional $75 billion for health care, exclusive of any spending for prescription drugs. That's $125 billion more for one year. And it is on top of the expected $150 billion increase in the works for 2003. He also proposed allocating the bulk of $75 billion in "tax cuts" to those who pay no income taxes. In other words, he seeks to increase welfare-style spending by the government, not reduce taxes.
If Mr. Gephardt and his party have it their way, the $148 billion increase in federal spending for fiscal 2002 will seem like small change in future years. And so, too, will the $159 billion deficit.

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