US spending surges to historic level

President Bush and the Republican-led Congress are spending money at a rate not seen since World War II - and America's expanding war on terrorism isn't the main reason.

Spending for national security, it is true, has surged due to the military effort in Iraq and stepped-up homeland security.

But judging by a bill that Congress is taking up Monday, the lasting fiscal legacy of the Bush administration will also include a historic rise in domestic spending that could affect everything from consumer interest rates to a fiscal landscape that could force epic tax increases in future.

The spending growth is punctuated this week by a single vote in the House that wraps in all the spending leftovers - not all the money for troops, not the big Medicare expansion - and totals $820 billion. That's as big as the annual economic output of Sweden and Spain combined.

Behind the shift are several factors, notably the Republican Party's changing strategy and the lapsing of self-imposed fiscal restraints in Congress since Mr. Bush took office.

"The Republican party is simply not interested in small government now," says Brian Riedl, a budget analyst at the Heritage Foundation, a conservative think tank. "They're worse than the Democrats they replaced."

The upshot: Federal spending per household is above $20,000 this year - a level not seen since World War II caused military spending to surge. This time, military spending is again a big factor, but accounts for less than half of recent increases, the Heritage Foundation says.

It's not just all those pork projects crammed into the end-of-year spending package that worries conservatives. Many concede that pet projects are the price of getting out of Washington, no matter which party has control.

More broadly, what troubles many conservatives - and could open a rift within the Republican Party - is Mr. Bush's apparent abandonment of "small government" as a party mantra.

But long-time GOP conservatives are also beginning to say publicly that big government may also be the price for any party that aspires to hold onto its majority. Stung by electoral losses in 1996 and 1998, Republican leaders dropped talk of abolishing the Department of Education and cutting government. "It turned out the American people did not want a major reduction of government," writes Rep. John Boehner (R) of Ohio in a position paper released last week titled: "Are Republicans the Party of Big Government?"

While Republicans would like to see government shrink, "new political realities," including 9/11 and "the multitude of stakeholders in government after years of liberal control" mean that Republicans often have to settle for simply slowing its growth, writes Mr. Boehner, an architect of the GOP takeover of the House in 1994. "Republicans have accepted such realities as the burdens of majority governance."

Much of the $2.2 trillion that Washington is expected to spend in fiscal year 2004 is for mandatory spending on Social Security and Medicare. But so-called discretionary spending has also increased some 22 percent during the Bush presidency, from $734 billion in 2002 to $873 billion in 2004.

The Concord Coalition, a bipartisan watchdog, calls this the "most irresponsible year ever."

The House may approve the spending bill Monday. In the Senate passage is also expected but the vote could be delayed, perhaps into the new year, by Democratic maneuvering.

While critics decry billions of dollars of small "pork" projects, the bulk of domestic spending is for major programs. Exhibit A is the expansion of Medicare to include prescription drugs, which President Bush is expected to sign into law Monday. Sold as a $400 billion reform, the real costs could soar past $2 trillion in the second decade, as 76 million baby boomers begin to retire into the system. Conservatives say it's a formula for massive deficits and tax increases in the years to come.

Then, there's the $180 billion farm bill, passed just in time for 2002 elections, when farm states determined control of the Senate. It buried out of sight any thought of rolling back the federal system of farm support, which conservatives once pledged to abolish.

The president's signature No Child Left Behind Act increased education spending by 33 to 68 percent, depending on how you calculate the numbers.

While lauding the Bush administration's annual tax cuts, conservatives worry that what will determine taxes in the long run is what Washington spends.

The extent of the spending increase depends on how you cut the numbers. "The president laid down a marker of keeping the growth in discretionary spending for this fiscal year at 4 percent or below," says Chad Kolton, a spokesman for the White House Office of Management and Budget. "Congress will meet that target laid down by the president," not including the $87 billion that Congress has already voted for supplemental defense spending in fiscal year 2004.

In fact, if you focus only on nondefense spending that the president can control, the Bush record on fiscal discipline is even better, he adds. Liberal budget analysts agree that there has been some squeeze on social programs in the Bush years, especially in 2003 and 2004.

One reason for rising spending: The GOP's margin of control is tight in both the House and the Senate. On Capitol Hill, more spending has always been a formula for winning agreement on tight votes. In addition, key budget restraints such as pay-as-you-go requirements have been allowed to sunset. On Oct. 1, 2002, the two main enforcement provisions for budget discipline on Capitol Hill were allowed to quietly expire. These include caps on discretionary spending and PAYGO provisions, which require offsets for new programs.

Federal spending is now at a level surpassed only during World War II, after running about $18,000 per year in the 1990s.

Spending/ per household

1. 1944 $26,445

2. 1945 $25,572

3. 1943 $23,370

4. 2003 $20,399

Source: Heritage Foundation, constant dollars