A memo we'd like to see

July 21, 2002

To: President Bush

From: Mitch Daniels, director

Office of Management and Budget

Re: Veto threat on spending

Mr. President:

Congress knuckled after I warned that you might veto the emergency defense spending bill if they didn't cut the pork. You've never vetoed anything -- not even that bloated farm bill -- but they chose not to call my bluff.

Whew! I'm not sure how it would have turned out myself once the gang in the political shop got involved.

The bad news is our victory is very small, $1.5 billion in cuts from a package still costing almost $29 billion. It doesn't begin to address the larger problem that federal spending is almost completely out of control. Compared with your record, Bill Clinton looks like a fiscal conservative.

If we don't figure out a way to put on some curbs soon, we're going to have some huge bills come due about the middle of your second term.

Ever since Sept. 11, all semblance of restraint has been abandoned. Nobody batted an eye at the billions we've poured into the war on terrorism, and to help New York and the airlines recover from the attacks. Now every goofball congressional scheme for bringing home the bacon is labeled "homeland security."

And remember the lock box, where both you and Al Gore promised to keep Social Security money until the baby boomers need it?

The lock box is empty, and the debt is rising again, just as those baby boomers are looking at their 401(k) statements and figuring they're going to need Social Security benefits more than ever.

The stock market is a big part of the problem. Hill Republicans figure we're collecting $93 billion less in tax revenue for fiscal 2002 than we expected, mostly because investors aren't scoring big capital gains. Next year, the tax shortfall looks like about $84 billion. This all comes before most of your $1.35 trillion tax cut kicks in, around the middle of the decade.

But you can blame the rest of the deficit this year on spending. There was $50 billion for the economic stimulus bill passed last March and $3 billion for the first installment of the $190 billion farm bill. Now we're going to add almost $29 billion for this emergency defense bill.

The picture just gets worse as we go along. Congress has barely started work on the spending bills that make up the 2003 budget. If the past is any guide, our battle to hold the spending in check will be nasty, brutish and long. In an election year, our guys are just as bad as theirs.

And that's only the half of it. Governors want more money for Medicaid. We're losing ground in the effort to resist a guaranteed drug benefit for Medicare. That kind of spending just grows automatically once you approve it the first time.

Budget hawks were talking earlier this year about trying to reimpose spending ceilings that are about to expire after 17 years. Nothing has come of that.

Your veto pen is really the only hope we've got if the stock market doesn't roar back soon. If the moment comes, I hope you're ready to use it.

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