The Third GOP Revolution by Fareed Zakaria

March 12, 2001, U.S. Edition

The Third GOP Revolution
George W's real test is cutting both taxes and spending--a feat that eluded Reagan and Newt
By Fareed Zakaria

George W. Bush's strange honeymoon--utterly overshadowed by the sprawling psychodrama of Bill Clinton's last days in office--has ended. The president now moves to center stage and faces his most important test: the fate of his proposed $1.6 trillion tax cut. Washington's politicians and pundits--liberal and conservative, Republican and Democrat--have declared that the success of his presidency will depend on whether he gets his tax plan through Congress.

Actually, the key to the success of the Bush presidency, and perhaps even the future of conservative politics, is not the tax cut--which will almost certainly pass in some form--but something much more prosaic: spending. The irresistible force of the Bush tax cut is about to meet the immovable object of congressional spending. And if George W. Bush cannot get a Republican Congress to keep to his spending limits, his fiscal program will fail and Republican ideology will be discredited for years.

Bush is the third national politician in recent decades to propose a Republican revolution. The leader of the first such effort, Ronald Reagan, railed against government and proposed large tax cuts and controls on spending (outside of defense). The tax cuts passed, the defense budget rose, but the spending restraint never materialized. As a result, the deficit skyrocketed. People often blame the deficits on the Reagan tax cuts, but if during his eight years in office domestic spending (outside of defense) had simply increased at the rate of inflation, the federal budget would have had a surplus of almost $250 billion at the end of the Reagan presidency. (In fact, the deficit was about $152 billion in 1989.)

Then came the Gingrich revolution. With Republicans in control of both houses of Congress, Newt Gingrich proposed tax cuts as well as a radical reduction in the size and scope of the federal government. Bill Clinton was able to thwart most of the tax cuts. But the Republicans needed little prodding to give up the fight on reducing spending. After one virtuous year, 1995, the feasting began anew. Between 1996 and 2000 the domestic budget rose by a walloping 14 percent over inflation. Over the last two years, as the surplus grew, Congress has exploded budget caps and engaged in an orgy of spending. As a result, the 106^th Congress, led by Dennis Hastert, Tom DeLay and Richard Armey, was the biggest-spending Congress in a quarter century, bringing back the days of Jimmy Carter and Tip O'Neill.

Bush seems to have studied his predecessors. It is often pointed out that he is the anti-Gingrich--soft, cuddly and, well, compassionate. But Bush, for all his sunny national cheerleading, is also the anti-Reagan. Ronald Reagan railed against government in theory but loved it in fact. His budgets proposed virtually no reductions in spending. As his budget director David Stockman memorably noted, Ronald Reagan was too sentimental to lead a revolution.

Bush, in contrast, can't stop talking about his love of government. He speaks fondly of its role in education, housing, health care and Social Security. But while praising government in theory, he wants to restrain it in fact. His budget requires that government spending--outside of Social Security and Medicare--rise by no more than 4 percent. (It rose by almost 9 percent last year.) Most cabinet agencies would see their budgets actually fall.

The spending limits Bush has proposed are both good policy and good politics. We have lived with a fantasy over the last few years that we have been fiscally responsible and that budget deficits are a thing of the past. The bulging surpluses are supposed to be heady proof of all these virtues. Nonsense. The deficits turned into surpluses in small part because of tax increases and some spending restraint. The overwhelming cause, however, is the boom of the late 1990s and the decade long decline in defense and energy spending--both products of the end of the cold war. Outside of these areas the size of the federal government grew substantially in the last decade. Paul Light of the Brookings Institution points out that since both these departments have begun growing again--and Bush intends to expand defense even more--the federal government is set to grow mightily, absent restraints on spending.

If spending doesn't slow, there are two possible scenarios over the next decade. Either the surpluses will prove even larger than expected, government will grow fast and furious under Bush and conservatives will be seen as hypocrites. (Besides, if spending is the name of the game, then Republicans will never be able to outdo Democrats.) On the other hand, if the surpluses shrink, then the GOP will be blamed for the resulting deficits and for years after will be tarred as the fiscally irresponsible party.

Will spending slow? Over the last four decades Congress--whether Democrat or Republican--has shown itself incapable of restraint. Conservatives are fond of saying that God put Republicans on earth to cut taxes. If so, he erred. Anyone can cut taxes. It takes divine intervention to cut spending.

Actually, one Republican leader in recent decades was able to persuade Congress to put in place budget caps that worked--at least for a while. But in return for those controls, in 1990 President George H. W. Bush agreed to a small tax increase. That deal angered his right wing and probably cost him the presidency. If his son can cut both taxes and spending, then he will truly have outdone his father.