The Economy

Dec. 21, 2004
Who taxes, who spends?

Which political party is more likely to cut the deficit (or boost the surplus)? The following table shows the annual percentage changes in expenditures and receipts in constant dollars for each of the nine presidents since the end of World War II (the Nixon and Ford administrations are combined). The third column shows the change in the budget position during those terms; all figures are on a fiscal-year basis.

Annual percentage changes in . . .
Spending Taxes Budget Ratio
A 5.8 7.3 +1.5
B 5.1 4.5 -0.6
C 4.0 1.9 -2.1
D 2.8 3.2 +0.4
E 2.8 2.5 -0.3
F 1.8 2.5 +0.7
G 1.5 0.0 -1.5
H 1.1 5.8 +4.7
I 0.1 3.9 +3.8
(I have listed these by the change in spending, since the change in taxes is more likely to be influenced by endogenous factors such as the state of the economy. To a certain extent, tax and spending programs of any given president may reflect legislation passed by his predecessor. Nonetheless, the figures don't lie.) Take a minute to guess who are the big spenders and taxers, and who are the big deficit reducers. The answers are, in order: Johnson, Kennedy, Nixon/Ford, Carter, Reagan, Eisenhower, Bush, Clinton, and Truman. Of the four Republican presidents, the deficit rose in three cases; Eisenhower was the only one who cut the deficit. Of the five Democratic presidents, all of them cut the deficit except for Kennedy; and if we assume the initial Johnson budget was a continuation of the Kennedy plans, there would have been a deficit reduction under Kennedy as well. Maybe this doesn't prove anything. Nonetheless, the historical record of the past 44 years shows that when the Oval Office is occupied by a Republican, the deficit widens, and when it is occupied by a Democrat, the deficit shrinks or the surplus widens. Furthermore, this pattern will probably continue. I previously have said that the election in 2000 will be based primarily on what the voters want to do with the surplus: save it, spend it, or reduce taxes. According to recent public opinion polls, voters are more or less evenly split between the first two options, with only about 20% saying they want a tax cut. I am assuming the race will be between George W. Bush and Al Gore. Considering what happened to his dad, George W. Bush will presumably campaign strongly in favor of tax cuts. Whether he is believed is another matter, but his position will be clear. The position of Ozone Al Gore is not so obvious. He certainly doesn't want tax cuts; that would just be returning some of their own money to taxpayers, who obviously are too stupid to spend it intelligently. He is more interested in saving the environment and raising the moral tone of the country, sort of like Jimmy Carter without the charm. It should be obvious to all but the most hard-core liberals that the government can do a great deal of damage to the economy and society generally without raising government spending, merely by introducing egregious regulations. Of course the Republicans must carry their share of the burden for the raft of regulations added during the Nixon Administration, but on balance the Democrats have been more eager to meddle with the economy through nonbudget changes. I continue to think that a vote for Gore is a vote for overkill environmental regulations and a concomitant decline in productivity growth. Nonetheless, the odds are much greater that the surplus will grow under Gore than it will under Bush, who is much more likely to push for massive tax cuts. It's up to the voters. Michael K. Evans is president of the Evans Group and professor of economics at the Kellogg School of Business, Northwestern University, Evanston, Ill. His e-mail address is [email protected].

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