Remember when the GOP was the party of small government? Well, those days are gone, writes an expert on fiscal management in the latest Milken Institute Review.
Stephen Slivinski, director of budget studies at the Cato Institute, asserts that the Republican Party — in charge of both the presidency and Congress — has become the party of big spending.
"The one-time party of fiscal prudence has ceded all claims to the high moral ground on budget matters, overseeing the largest increase in government spending since Lyndon Johnson′s Great Society," he writes in the new issue of the Institute′s quarterly journal of economic policy.
Slivinski details how federal government outlays have grown — from $1.86 trillion in 2001 to $2.47 trillion today — thanks not only to increases in defense and entitlement programs like Medicare, but in discretionary spending programs as well.
"The Republican Party has discovered that the path of least resistance in Washington leads to bigger government," he writes. "But as Republicans stray ever further from their roots in fiscal prudence, one must wonder whether the easy way is also the politically myopic way."
Also in this issue, Martin Baily, chairman of the Council of Economic Advisors in the Clinton administration, and Diana Farrell, director of the McKinsey Global Institute, examine Europe′s economic doldrums and argue that, paradoxically, the only way to preserve the welfare state from bankruptcy is to allow free markets to rekindle growth.
"Europe could get its economy moving again without abandoning the social values it holds dear," they write. "But many of Europe′s current regulations, while aimed at preserving those values, are hindering the region′s ability to compete in global markets. They need a thorough overhaul."
Other highlights from the new Review:
- Joel Slemrod of the University of Michigan′s Ross School of Business and Katherine Blauvelt, a graduate student at the University of Michigan, admire the professionalism of President Bush′s panel on tax reform, but find little reason to believe much will change. "The best that can be hoped for here is that the proposals will focus attention on both the need for tax reform and the inherent tensions between tax equity, efficiency and simplicity."
- Robert Looney, who teaches economics at the Naval Postgraduate School in Monterey, offers a searing analysis of the oil-rich — yet deeply dysfunctional — Iranian economy. "The saddest part here is that the gap between what Iran is and what it could be is so wide. ... But for the moment, at least, Iran remains hostage to religious reactionaries and their camp followers."
- Tomas Philipson, a senior fellow at the Milken Institute, and Anupam Jena, an M.D./Ph.D. student at the University of Chicago, make the case that in light of the huge gains in health linked to modern drugs — in the case of AIDS medications, for example, longer lives translate to $1.4 trillion in value — we could be better off if drug companies charged more. "Our findings suggest that, at least in certain areas, it would serve the broader interests of society to make medical innovation more profitable."
- Donald Leal, a senior fellow at the Property and Environment Research Center in Montana, maintains that what amounts to privatization of ocean fisheries can save them from ruin and even save lives in the process. "The good news here is that what direct regulation is unable to accomplish, market-based regulation can."
- Peter Frumkin, a professor at the University of Texas at Austin, says that in philanthropy, as in business, when money is spent is as important as what it′s spent on. "One must decide if today′s social problems are more pressing than tomorrow′s will be."
This issue′s book excerpt comes from The Purchase of Intimacy, by Viviana Zelizer of Princeton, who takes a unique look at the economics of interpersonal relations. Also in this issue: a Charticle by Milken Institute economists James Barth, Tong Li and Glenn Yago, who find that, in spite of huge foreign purchases of U.S. stocks and bonds in recent years, there is a surprising amount of "bias" against ownership of American assets; Research F.Y.I., highlighting the latest new research in economics; and yet another offbeat, end-of-book "Lists."
The Milken Institute Review is sent quarterly to the world′s leading business and financial executives, senior policy makers and journalists. Its editor is Peter Passell, former economics columnist for The New York Times.