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Trivia Tidbit Of The Day: Part 183 -- The Peace Dividend & Surpluses In The 1990s.

The End Of The Cold War = 1990s Budget Surpluses-

Small government conservatives often wring their hands and sigh and otherwise whine about the failure of the GOP to control spending. We had surpluses, afterall, in the 1990s. Wonderful, wonderful surpluses. Yay for surpluses. Hip, hip, hooray.

But why did we have those surpluses? Was it the wonderful fiscal discipline of President Clinton? Or was it the Republican Revolution?

Maybe it was neither.

Maybe it was just a booming dot-com economy, which lined the government coffers, and the post-Cold War peace dividend, which allowed the government to keep overall spending levels in check. Spending increased mightily in the 1990s on all sorts of things. President Clinton and the Congresses of the 1990s were just fortunate enough to have that wonderful peace dividend:

Clinton-- and even Republican Congresses in the mid-1990s-- do not deserve accolades for controlling discretionary spending. Quite to the contrary:

Newly released data from the Congressional Budget Office show that, as in other areas of his life, Clinton didn't exercise tremendous self-control when it came to domestic spending — contrary to the image now put forward that the 1990s was an era of unprecedented fiscal rectitude.

It's true that government spending in the 1990s increased on average only about 3% a year, which was well below GDP.

Reduced military spending contributed to federal budget surpluses in the late 1990s. Increased military spending has contributed to budget deficits today (underlining mine):

But this can be accounted for by the post-Cold War reduction in defense and the savings in interest associated with it. Defense expenditure dropped from 5.6% of GDP in 1989 to only 3% a decade later, while interest came down from 3.1% in 1989 to 2.5% in 1999.

Spending as a proportion of GDP in all other areas over the same period increased from 12.5% to 13.2%.

So it was defense reductions that account for the fact that spending overall dropped from more than 21% of GDP on the eve of the 1990s to well under 19% at the end of the decade.

With annual defense spending increasing from $306 billion in 2001 to more than $450 billion in the post-9-11 world of today, a repeat of the kind of defense cuts seen in the 1990s seems impossible.

Spending has gone up in recent years, but as I have noted often, the big increases have been in a few specific areas.

1. National defense. We have a war on terror. The peace dividend is gone. Afghanistan. Iraq. Et al.
2. Entitlements. We, meanwhile, have social welfare spending demographics catching up to us. These same demographics favored us in the 1990s. But now the edges of the age-based iceberg are upon us. Medicare. Medicaid. Social Security. Etc. This is spending that was locked in long ago. That hurts.

If we want to be intellectually honest, let's focus on where Bush and the GOP have been weak on spending.

1. Education. No Child Left Behind. Something Bush campaigned on in 2000.
2. Farm subsidies. Unfortunately, something Bush campaigned on. And something a lot of those red state members of Congress campaign on each go-around.
3. Medicare Prescription Drug Benefit (which hasn't even yet contributed to the budget problems). This is also something Bush campaigned on in 2000.

These three areas are not that big compared to the massive, hardly-optional increases in military/defense spending and entitlements. So, while it's certainly admirable to bust up that nasty pork and to keep our team honest on their principles, let's all keep it in perspective, por favor.

Because, honestly, it has gotten a little tedious reading and hearing, over and over, without any context whatsoever, about how terrible the GOP has been on spending in recent years, and how wonderful the 1990s budget surpluses were.

Previous Trivia Tidbit: Middle Class.

Posted by Will Franklin · 12 October 2005 10:41 PM

Comments

Posted by: Hoodlumman at October 13, 2005 09:21 AM

Posted by: Steve at October 13, 2005 11:23 AM

Posted by: Jim Hoft at October 13, 2005 01:45 PM