America's Fiscal Constitution (74 page)

C
HAPTER
12

1
. May,
American Cold War Strategy
, 74–75.

2
. Chace,
Acheson
, 269.

3
. Dean Acheson quoted in Gaddis,
We Now Know
, 76.

4
. Leffler,
A Preponderance of Power
, 373.

5
. OMB, Historical Tables, “Table 1.1–Summary of Receipts, Outlays, and Surpluses or Deficits: 1789–2018.”

6
. See Appendix C.

7
. Truman, “Special Message to the Congress Recommending a ‘Pay as We Go’ Tax Program.”

8
. Truman quoted in Hormats,
The Price of Liberty
, 184.

9
. Joseph Stalin quoted in Gellately,
Stalin’s Curse
, 340.

10
. Smithies,
The Budgetary Process
, 124.

11
. Livingston,
U.S. Social Security
, 16.

12
. Zelizer,
Taxing America
, 75.

13
. Unlike the House, the Senate did not include coverage of workers who had contributed to the system but had to leave work before the age of sixty-five because of disabilities. Two years later, the House again overwhelmingly supported a partial pension for younger but disabled workers, as advocated by Doughton. The aging
chairman planned to retire that year and challenged critics of the proposal by asking, “What political motives could I have?” The Senate again deleted disability coverage in conference committee.

14
. Brownlee,
Funding the Modern American State
, 163.

15
. Smith and Moore,
Medicaid Politics and Policy
, 35.

16
. Eisenhower, “Special Message.”

17
. Lawrence Lindsey quoted in Noah, “Meme Watch.”

18
. Bush, “Second Inaugural Address.”

19
. Kotlikoff and Burns,
The Coming Generational Storm
, 240.

20
. US National Center for Health Statistics,
Vital Statistics of the United States: 1957
,
http://www.cdc.gov/nchs/products/vsus.htm
.

21
. Bell and Miller, “Actuarial Study No. 120.”

22
. Werner,
The Older Population
.

23
. US Census Bureau, 2010 Census,
http://www.census.gov/2010census/
.

24
. “Monthly Statistical Snapshot, June 2013: Table 2,” Social Security Administration,
http://www.ssa.gov/policy/docs/quickfacts/stat_snapshot/
.

25
. Excellent accounts of the ensuing agreement include Melzer,
The History of the Federal Reserve
, 691–712, and Robert Heltzer and Ralph Leach, “The Treasury-Fed Accord: A New Narrative Account,” Federal Reserve Board of Richmond
Economic Quarterly
87, no. 1 (2001).

26
. Marriner Eccles quoted in Hetzel and Leach, “The Treasury-Fed Accord,” 43.

27
. Truman, “Statement by the President in Response to a Joint Announcement.”

28
. This interest rate is calculated by dividing the gross interest on debt paid each fiscal year by the beginning and ending balance of outstanding interest-bearing debt. For gross interest, see Department of the Treasury,
Statistical Appendix
, 8–15. For interest-bearing debt, see Appendix A and note 3. The interest rate on new long bonds rose even more, from 2.32 in 1950 to 4.01 in 1960. See also Homer and Sylla,
Interest Rates
, Table 5.1 at 375.

29
. See Appendix A.

30
. OMB, Historical Tables, “Table 2.1–Receipts by Source: 1934–2018.”

31
. Eisenhower, “State of the Union,” January 5, 1956.

32
. Eisenhower, “The President’s News Conference.”

33
. Eisenhower, “Radio and Television Address.”

34
. Quoted in Stein,
The Fiscal Revolution
, 395.

35
. Morgan,
Eisenhower Versus ‘The Spenders’
, 87–88.

36
. Harry Byrd quoted in Heinemann,
Harry Byrd
, 364.

37
. Goldwater,
Conscience of a Conservative
, 38.

38
. Stein,
The Fiscal Revolution
, 333.

39
. Anderson, “Financial Policies for Sustainable Growth,” 132–133.

40
. Eisenhower, “State of the Union,” January 7, 1960.

41
. OMB, Historical Tables, “Table 3.1—Outlays by Superfunction and Function: 1940–2018.”

42
. Rose,
Interstate
, 31.

43
. Ibid., 70.

44
. Ibid., 71.

45
. The first major American scholar to make this point was Henry Vethake in his work
The Principles of Political Economy
in 1838. However, his analysis did not draw on later economic work concerning the efficient allocation of resources used by Buchanan.

46
. Eisenhower,
Mandate for Change
, 129.

47
. Eisenhower, “Chance for Peace.”

48
. Pach and Richardson,
Eisenhower
, 80.

49
. Perret,
Eisenhower
, 462.

50
. Gaddis,
We Now Know
, 248.

51
. Pach and Richardson,
Eisenhower
, 214.

52
. Ibid., 221.

53
. For an excellent summary of inflation-adjusted defense budgets by category, see Meeker,
A Basic Summary
.

54
. Eisenhower, “Farewell Address.”

55
. Kennedy, “Statement by Senator John F. Kennedy.”

56
. Bureau of the Census,
Statistical Abstract
, Table 567 at 369.

57
. Jacoby, “The Fiscal Policy of the Kennedy-Johnson Administration.”

58
. Reeves,
President Kennedy
, 331.

59
. “JFK on the Economy and Taxes.”

60
. Reeves,
President Kennedy
, 319.

61
. Douglas Dillon quoted in “Treasury Secretary Says US Can’t Afford Tax Cut.”

C
HAPTER
13

1
. Kennedy, “Letter to the Chairman.”

2
. Stein,
The Fiscal Revolution
, 452–453.

3
. Johnson,
The Vantage Point
, 36.

4
. Ibid., 37.

5
. Johnson, “State of the Union Address (January 8, 1964).”

6
. Al Gore Sr. quoted in Reeves,
President Kennedy
, 434.

7
. Mann,
Legacy to Power
, 220.

8
. Lowndes, “The Revenue Act of 1964,” 667.

9
. OMB, Historical Tables, “Table 1.4—Receipts, Outlays, and Surpluses or Deficits by Fund Group: 1934–2018.”

10
. OMB, Historical Tables, “Table 3.1—Outlays by Superfunction and Function: 1940–2018.”

11
. The administrative or federal funds budget excludes trust funds, such as those for pensions and highways. Federal grants to states for education, health, and housing had been championed by former conservative leader Robert Taft. From
Eisenhower’s last budget to Johnson’s first, spending for those programs had grown from $3.2 billion to $5 billion. By contrast, spending for defense, veterans, and space programs amounted to $62 billion.

12
. Starr,
Remedy and Reaction: The Peculiar American Struggle over Health Care Reform
(New Haven, CT: Yale University Press, 2011), 44.

13
. Reagan, “Ronald Reagan Speaks Out Against Socialized Medicine.”

14
. Manley,
The Politics of Finance
, 148.

15
. Wilbur Mills quoted in Zelizer,
Taxing America
, 174.

16
. Ibid., 236.

17
. Mills quoted in Kennon and Rogers,
The Committee on Ways and Means
, 343.

18
. Johnson quoted in Loker,
The History and Evolution of Healthcare in America
, 171.

19
. Lyndon B. Johnson, telephone call with John McCormack, Wilbur Mills, Wilbur Cohen, and Carl Albert, March 23, 1965, in “Recordings and Transcripts of Conversations,” Citation 7141, LBJ Presidential Library.

20
. Mills quoted in Smith and Moore,
Medicaid Politics and Policy
, 44.

21
. Starr,
Remedy and Reaction
, 410.

22
. Johnson, “Remarks with President Truman.”

23
. The original Medicare Part A reimbursement formulas helped fuel rising costs by reimbursing the capitalized costs of the hospital room and equipment, spurring new construction. By 1990 hospitalization costs, adjusted for normal inflation and even after price controls imposed in 1983, were 165 percent higher than originally estimated by the chief actuary, Robert Myers.

24
. Smith and Moore,
Medicaid Politics and Policy
, 75–76.

25
. Vladeck,
Unloving Care: The Nursing Home Tragedy
(New York: Basic Books, 1980), 49.

26
. “Medicare and Medicaid Statistical Supplement: 2012 Edition,” Centers for Medicare & Medicaid Services, Tables 13.4, 13.8, and 13.9,
http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareMedicaidStatSupp/2012.html
.

27
. US National Center for Health Statistics,
Vital Statistics of the United States: 1965
,
http://www.cdc.gov/nchs/products/vsus.htm
. See also Kotlikoff and Burns,
The Coming Generational Storm
.

28
. From time to time states that underestimated the costs of programs financed by matching grants had “purged their rolls” in violation of their own eligibility requirements. In
Goldberg v. Kelly
, 397 U.S. 254 (1970), Justice Brennan said that “such benefits are a matter of statutory entitlement to those eligible to receive them.” By 1965 federal law also dramatically changed the operation of some hospitals receiving Medicare payments by prohibiting racial discrimination.

29
. Daggett,
Costs of Major U.S. Wars
.

30
. OMB, Historical Tables, “Table 3.1—Outlays by Superfunction and Function: 1940–2018.”

31
. Wilbur Mills quoted in Zelizer,
Taxing America
, 337.

32
. Johnson,
Vantage Point
, 450.

33
. Wilbur Mills quoted in Zelizer,
Taxing America
, 211.

34
. Ibid., 272.

35
. Assistant Treasury Secretary Samuel Surrey found it odd that in order to close the deficit, the Ways and Means Committee would use a tax bill to control federal spending rather than eliminating tax deductions or exclusions. This experience led Surrey to develop the phrase “tax expenditures,” a phrase used routinely by President Obama.

36
. McChesney Martin quoted in Green,
Changing America
, 57.

37
. Johnson, “President Lyndon B. Johnson’s Address to the Nation.”

38
. Ibid.

39
. Johnson,
Vantage Point
, 457.

40
. Johnson quoted in Brundage,
The Bureau of the Budget
, 254.

41
. See Appendix C.

42
. See Appendix A.

43
. Stabile and Cantor,
Public Debt
, 135.

44
. See Appendix B.

45
. Nixon, “Inaugural Address.”

46
. Matusow,
Nixon’s Economy
, 57–58.

47
. Ibid., 4.

48
. Ibid., 49–50.

49
. Ibid., 77.

50
. Ibid., 77–78.

51
. OMB, Historical Tables, “Table 7.3–Statutory Limits on Federal Debt: 1940–Current.” For an overview of the debt ceiling, see Austin and Levit,
The Debt Limit
.

52
. Matusow,
Nixon’s Economy
, 59. For a good record of how Nixon conveyed these views, see Abrams, “How Richard Nixon Pressured Arthur Burns.”

53
. See Appendix A and its note 4.

54
. See Appendix A and its note 4.

55
. Timberlake,
Monetary Policy
, 345–347.

56
. Marmor,
The Politics of Medicare
, Tables 7.1 and 7.2 at 98.

57
.
2013 Annual Report
,
Federal Hospital Insurance
, Tables V.B1, V.B3, and V.B5 from 191–199.

58
. Federal funds support of outpatient services would grow to $2.3 billion in 1975 and $6.9 billion by 1980, largely as a result of higher prices for medical services and limits on the premium share paid by beneficiaries. These outlays grew to $33.2 billion in 1990 and $61.7 billion in 1996. Medicaid spending, paid for entirely with federal funds, would increase to $14.5 billion in 1980 and $41.1 billion by 1990.