The Long Run

Source: Office of Management and Budget

“I feel comfortable in the job – not overwhelmed – and confident that I can hold my own for the United States in the international forum,” President George Bush said on September 4, 1989.  “But on the domestic side – it troubles me the most,” said the president, with attention to the first federal budget for which he would be responsible as the nation’s chief executive.  “I worry long run about the 1991 budget and how to get it in shape.” 1

The federal government works on three budgets at any given time – executing the budget for the current fiscal year (FY) that began the previous October 1st; completing legislative review on the budget for the upcoming FY that begins on the first day of October; and preparing the next FY budget for legislative review.  In September 1989, for example, government agencies were executing the FY 1989 budget; Congress was reviewing the FY 1990 budget, the last one submitted by President Ronald Reagan and scheduled to begin execution in less than a month; and following his inauguration in January 1989, President Bush was preparing to submit the FY 1991 budget for legislative review to begin on the first Monday of February 1990.2

As the above figure illustrates, Bush, a Yale economist, was able to get the FY 1991 budget in shape for the baseline long run.  Spending cuts in FY 1992 initiated a program of deficit reduction.  And Bush’s peace dividend, with cuts in defense spending that started under his leadership, further contributed to fiscal policies that produced a budget surplus during FY 1997.  In spite of growing federal deficits reappearing with President Bill Clinton’s FY 2001 budget, President George W. Bush was able to reverse Clinton’s negative trend midway through his first term in the White House.3

Now that Barack Obama is out of touch with the problems affecting Americans, leading the country down a path to fiscal ruin by adding new entitlement spending to an economy struggling with high unemployment, it is imperative that Congress fills the fiscal leadership void with another view to the long run taken 21 years ago by the elder President Bush.4

References

1.  George Bush, All the Best, George Bush: My Life in Letters and Other Writings (New York: Scribner, 1999), 439.

2.  Jerry McCaffrey, “Features of the Budgetary Process,” in Handbook of Government Budgeting, ed. Roy T. Meyers (San Francisco: Jossey-Bass, 1999), 3-29.  The EOP Foundation, Understanding the Budget of the United States Government (Washington: The EOP Foundation, 2005), 149.

3.  Graham Bannock, Ron Baxter, and Evan Davis, The Economist Dictionary of Economics, Fourth Edition (Princeton: Bloomberg Press, 2003), 232.  Bush, All the Best, George Bush, 61.  Daniel C. Diller and Dean J. Peterson, “Chief Economist,” in Guide to the Presidency, Second Edition, ed. Michael Nelson (Washington: CQ Press, 1996), 706.

4.  David C. Patterson, “The Roads to Fiscal Ruin,” Barron’s, August 23, 2010, Other Voices.

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