Most voters seem to agree that Mitt Romney would do a better job of taming the debt. He certainly talks a lot about it. During the primary season he said that borrowing money to finance disaster relief would be “immoral” and that such activities should be left to state and local governments or the private sector (not sure how that would work). And his running mate. Paul Ryan, has garnered a reputation as a budget hawk.
But the historical record is not encouraging for deficit hawks. Republicans have been good at cutting taxes, arguing that the problem is not inadequate revenues but too much spending. Obviously, the next step is to cut spending, but they have done a poor job on that front.
My former Urban Institute and Tax Policy Center colleague Gene Steuerle has put together a fascinating time series of spending change by presidency, measured as a share of GDP. The chart above shows the data for domestic spending–that is, excluding defense and interest on the debt. Through the Clinton years, the top four presidents are Richard Nixon, Herbert Hoover, Dwight Eisenhower, and George H.W. Bush–all Republicans.
The most fiscally responsible president by this metric is a surprise: Franklin Delano Roosevelt. Here is Gene’s explanation:
[T]he liberal New Dealer, Franklin D. Roosevelt, is at the bottom of the list. Domestic spending actually fell by 3.6 percentage points of GDP during his tenure. How can this be? The massive World War II defense build-up crowded out domestic spending. … Perhaps more importantly, FDR’s New Deal programs were primarily short-run or counter-cyclical in nature, and focused on unemployment compensation and jobs. Much of the spending was not intended to be permanent [and disappeared when the economy recovered from the Great Depression] … Non-cyclical programs, such as retirement and health, remained quite small. Even at the end of the Truman administration, domestic spending was 1.6 percentage points lower than it had been when FDR took office two decades earlier. Finally, much of the increase in domestic spending in response to the Depression occurred prior to Roosevelt’s presidency, under Hoover.
The only Republican true to stereotype is Ronald Reagan, who cut domestic spending by 2 percent of GDP. The other big post-World War II spending cutter was Bill Clinton, who cut domestic spending by 0.6 percent of GDP.
Gene also gave me data for George W. Bush and Barack Obama, whose spending records are complicated by the response to the Great Recession. From beginning to end of President Bush’s term, spending increased by 5.6 percent of GDP. which would give him the all-time lead if included in the chart. But even if we stopped the clock at the end of fiscal year 2007, before the recession hit, he increased domestic spending by 0.7 percent of GDP.
Through FY2011, President Obama actually cut domestic spending slightly from the very high levels at the end of the Bush administration, and spending has been cut further since then. Given the slowness of economic recovery, that was probably a mistake, but it certainly suggests that the image of the President as a fiscal profligate is not entirely deserved.
Of course, the effect on the debt depends also on defense, tax revenues, and interest. The chart above shows the debt record of presidents since Eisenhower. (I exclude FDR, who borrowed heavily to finance World War II, and Truman, who benefited from an enormous peace dividend, because they are both outliers by a wide margin.) Four of the five biggest borrowers were Republicans. Ronald Reagan more than made up for his domestic spending cuts with large tax cuts, a defense build-up, and large interest payments on the debt. President Obama wins biggest debtor honors, by a small margin over his predecessor, because of the combination of large outlays to fight the recession and tax revenues at the lowest level since the Truman Administration.
What lessons can we learn from this history? If President Obama wins reelection, his domestic spending path is likely to follow FDR’s, declining as the economy recovers. Even if he had dreams of significant new domestic spending programs, it is unlikely that the Republican-controlled House would accommodate them. Revenues will rebound with the economy and the president has proposed some other tax increases on high-income households.
What if Governor Romney is elected president? The fear is that he will follow the course of George W. Bush–enact significant tax cuts and then lose interest in the politically challenging work of cutting spending. The governor has been maddeningly vague about how he’d offset the cost of his tax cuts–which he promises will not increase the deficit–and he’ll have to take on much bigger items on the spending side than Big Bird. It’s even possible that the bipartisanship he promises will amount to trading spending increases favored by Democrats for further tax cuts, not a good deal for the government’s balance sheet.
I don’t have a crystal ball and it’s possible that Mitt Romney’s fiscal stewardship will live up to his campaign promises. But history suggests that they should be taken with a big dose of skepticism.
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