Some Heartening Trends At The Federal Level
October 22, 1998
Although the budget deal approved by Congress contains the kind of spending initiatives that make budget hawks wince, some recent trends at the federal level are encouraging to free-market advocates.
- In the past six years, federal spending has declined from 22.5 percent of gross domestic product in 1992 to less than 20 percent today.
- Total domestic spending, including entitlements, is growing by less than 2 percent per year after adjusting for inflation -- a dramatic reduction in social spending growth compared to the years when President George Bush occupied the White House.
- The targeted tax cuts which the Republicans proposed this year and then laid aside were not the type to encourage economic growth -- since they did not address the present high tax rates that discourage saving, investment and entrepreneurship.
- There is some evidence that President Clinton understands the need to privatize Social Security -- at least partially -- and that issue may come to the fore next year.
The argument is being made that foregoing tax cuts this year may have increased the chances of real Social Security reform, through privatization, next year. The budget surplus would be needed to fill the gap in financing current benefits if workers were allowed to shift some of their payroll taxes to private accounts.
Source: Daniel J. Mitchell (Heritage Foundation), "This Budget Is Better Than It Looks," Wall Street Journal, October 22, 1998.
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