Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, January 7, 1993 TAG: 9301070163
SECTION: NATIONAL/INTERNATIONAL PAGE: A1 EDITION: METRO
SOURCE: DAVID LAUTER LOS ANGELES TIMES
DATELINE: WASHINGTON LENGTH: Medium
MUCH CHANGED; SPENDING DIDN'T
On Feb. 18, 1981, in a huge auditorium jammed with television cameras and White House officials, then-budget director David Stockman unveiled the first spending plan of the new Republican era, promising to cut taxes, increase defense outlays and - by cutting overall spending - close the federal deficit by 1984.Twelve years later, in a small room with a tableful of reporters and minimal fanfare, Stockman's successor, Richard G. Darman, unveiled a document forecasting enormous deficits and proclaiming "the budget is on an unsustainable course that will have to be corrected."
Together, the documents paint a picture of how a decade-plus of Republican rule has affected the federal government's finances. It includes some substantial political successes, but at least one enormous failure.
Presidents Reagan and Bush succeeded in increasing the share of the nation's income allocated to defense. And they managed both to cut taxes overall and to shift a sizable share of the remaining tax burden away from upper-income taxpayers.
But, as Bush's final budget shows, they failed utterly in attempting to cut total government spending. Indeed, the government is spending tens of billions more than when the GOP tenure began.
The reason is simple. "The political system has accepted the reforms that affect the poor," Darman said, referring to cuts in welfare and other benefit programs for the needy. "It has not accepted the reforms that affect the rich."
"Nor, more importantly, has it accepted reforms, by and large, that affect the broad middle, and that is half the budget," he added. "Where you've got over 60 million adults who are beneficiaries of broad middle-class entitlement programs, that's a lot of voters."
Darman was referring to the rapid growth of mandatory spending programs such as Social Security and Medicare, which provide benefits to all elderly Americans. Attempts to limit entitlement spending have generated intense political opposition.
Bill Clinton's ability to achieve his goals of reviving economic growth and ending Washington gridlock will depend in large part on whether he can succeed where Darman's bosses failed.
When Reagan took over, the federal government spent just over 22 percent of gross domestic product - the sum of all goods and services produced in the country. Federal taxes and fees took in 19.6 percent of the GDP, leaving a gap - the deficit - of about $50 billion, or 2.7 percent of the total economy.
Twelve years later, the government spends nearly 24 percent of GDP. But revenues have been cut to 18.6 percent, leaving a gap of more than $320 billion, or 5.3 percent of the economic pie.
Those numbers show why the deficit has become a chronic problem: Taxes have gone down and spending has not. But they mask a series of changes involving where the money goes, and who provides it, that have shaped the political debates in Washington since Reagan's election.
Overall, the share of federal revenues derived from income taxes has gone down, while the percentage from Social Security taxes has gone up. The result has been the shifting of billions of dollars of tax liability away from upper-income taxpayers and toward middle- and lower-income wage-earners - a shift that became a key issue in Bill Clinton's presidential campaign.
Democratic and Republican budget experts agree that the big culprit in the federal deficit now is health care, which has increased more than fivefold during the last 12 years.