The Case for Dubya

Max Sawicky sawicky at
Mon Jan 31 15:08:17 PST 2000

NN: One question, then some quick comment/questions-- first, does the domestic discretionary include the Earned Income Tax Credit, since that is Clinton's largest social spending program increase.

EITC is under mandatory/entitlement, not discretionary. For 1999, it is $26 billion, or less than .3% of GDP. Note the EITC was launched in 1975, so the .3 is not a Clinton increase. A good part of it is, but not enough to make his numbers look much better.

Second, if the numbers are listed in terms of inflation-adjusted growth, rather than percentage of GNP, what do the numbers look like?

]mbs]: I haven't done that calculation. If I do I'll post it.

NN: Third, what do these numbers look like if state spending is combined with federal funds, since the federal government does do a lot of legislation that creates incentives for such spending -- the recent CHIPS child health care plan being an obvious example. As well, it can be argued that fiscal

[mbs]: the incentive changes cut both ways. AFDC was a matching grant program, but the match is gone now. State spending is pretty flat relative to GDP. From 1992 to 1996 (the latest # I have) it is down a hair, around 16% total.

I think crediting Clinton with state gov spending by the likes of the Bros. Bush, Pataki, and Wilson is a bit of a stretch.

NN: restraint at the federal level opens up political space for spending at the state level -- not my favorite way to raise and spend money because of more

[mbs]: No way Jose. The 'restraint' by the Feds is with spending, not taxes. Federal taxes are at the top of their historic range (around 21% of GDP).

NN: . . . regressive taxes, but if we are looking only at the spending side, it's worth seeing the numbers. (Actually, how are block grants to states figured in the above? As discretionary spending or something else?)

[mbs]: all Federal grants are counted as outlays, most discretionary, but the biggest one is an entitlement (Medicaid). In my state number (above), they are counted again as a state expenditure. But since Federal discretionary and mandatory are down from 92-99, the grants are likely to be as well.

NN: Fourth, it is worth noting the cyclical issues in these numbers, since 1992 was the bottoming out of a recession when automatic discretionary money is at its highest - notably unemployment insurance --

[mbs] The trough of the business cycle is March 1991, eight months after the previous peak in July of 1990. So Bush saw a rise, then a decline, then a rise again (too late to save his re-election). You're right that his spending for '91 and '92 would owe something to the business cycle, but this would apply to entitlements, not to discretionary.

NN: so don't overcredit Bush for presiding over a recession. Obviously, given the evil 1996 welfare law, economic expansion does not excuse some of the decrease in discretionary spending for Clinton, but it does explain some in a non-conservative way.

[mbs]: The decline in domestic discretionary cannot be brushed aside this way. AFDC and Food Stamps were entitlements, not discretionary.

nn: I wish there was a simple measure showing how much money is transferred from wealthy taxpayers to poorer citizens, since these raw numbers say little, since some of the discretionary money is corporate welfare. Any of the DC think tanks working on such a measure? -- Nathan Newman

There aren't any good numbers on the distribution of spending programs, aside from entitlements. On the whole entitlements are pretty progressive in impact. (that's why, ahem, the tax used to finance them is not too important.)

On the domestic discretionary side, I would challenge any assertion that much of it is "corporate welfare." Aside from defense, the bulk of what deserves the name corporate welfare derives from tax breaks, not spending.


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