President Bushs rhetoric in the State of the Union address is reminiscent of promises made in his 2000 campaign. It included limiting government spending, freeing entrepreneurs from burdensome regulations and giving Americans more choice in their own economic future, particularly their retirement. However, when his proposals are examined, what he really advocates is just a different system of government controls. This should come as no surprise given his actions during his first four years in office.
Bush stated that to make our economy more flexible, competitive, and innovative it would require the government to restrain its spending appetite. Yet during Bushs first four years in office the federal government went on its biggest eating binge since LBJs reckless spending in the late 1960s.
Although many assume that spending grew because of post 9/11 military expenditures, domestic discretionary spending has increased at a similar rate. In fact many of the agencies on the Republicans 1995 list of unnecessary government agencies, such as the departments of commerce and education, saw some of the largest spending increases during Bushs first term.
Going into his second term Bush proposes a budget that limits spending increases to below the rate of inflation. How can we expect Bush to keep this promise? The legislature is sure to add its own pork to his budget and Bush didnt veto a single bill during his first term in office. Never mind that even if he could keep this promise it would leave intact his already bloated spending from the last four years.
Social Security is clearly the biggest item on the Presidents domestic agenda. Yet all we heard was a bundle of contradictions and presidential double speak. Only in politics can voluntary mean not voluntary and can your money not be yours.
The centerpiece of Bushs Social Security reform is a voluntary personal retirement account. Yet what Bush means by voluntary is that young workers can stay in the current system, or go to his system where eventually up to four percentage points of workers payroll taxes will go to a personal investment account. My dictionary defines voluntary as action by ones own free will. If these accounts were really voluntary workers would not be forced by a tax to contribute at all. They could either save in a manner they choose, or not at all.
Bush promises that under his plan the money in the account is yours and the government can never take it away. We should not kid ourselves. Just like other private money, the government can always reduce the value of these accounts through future changes in the tax laws and inflation. The Bush individual retirement accounts also come with restrictions that will limit the type of investments you can make and the amount of money you can withdraw. Is the money in this type of account really yours if you can not decide what should be done with it? The Social Security reform Bush outlined in his State of the Union address is not voluntary and it doesnt create purely private accounts. It just creates a new version of government mandated and regulated retirement savings.
After the last four years, those advocating a reduction in the size and scope of government in our economy should not be seduced by President Bushs speech. Although the rhetoric of voluntary retirement accounts and restraining governments appetite for spending is tempting, Bushs proposals will not reduce the role of government in our economy. His proposals simply change the ways government intervenes. A prosperous economy and secure retirement can be achieved in a voluntary society, but Bushs State of the Union address should not be interpreted as a significant move in that direction.
|Benjamin Powell is a Senior Fellow at The Independent Institute, Director of the Free Market Institute at Texas Tech University, and former President of the Association of Private Enterprise Education. Dr. Powell received his Ph.D. in economics from George Mason University. He has been Assistant Professor of Economics at San Jose State University, Associate Professor of Economics at Suffolk University, a Fellow with the Mercatus Center's Global Prosperity Initiative, and a Visiting Research Fellow with the American Institute for Economic Research. He is also the editor of the Independent Institute books, Housing America: Building out of Crisis and Making Poor Nations Rich.|