The last five-and-a-half years have proven frustrating for those who hoped for budgetary discipline from Republicans in Congress and the White House. Having achieved political control through arguments against federal spending and the expansion of Washington’s power, the GOP increased both once in full control. As Brian Riedl noted here at Heritage in February of this year, both discretionary spending and entitlements have increased over the last fifteen years, and that growth has not slowed in the last five.

Since 1990, discretionary spending has increased 93 percent. Entitlements have risen 137 percent in the same period. The news did not get better under all-Republican rule. In fact, the federal budget has grown across the board since 2001, outstripping inflation (12 percent, overall) in several categories, such as education (137 percent), community and regional development (342 percent), Medicare (58 percent), housing and commerce (58 percent), Medicaid (49 percent), and water transportation (46 percent). The federal budget for health research and regulation has grown by 78 percent since 2001 and now consumes $76B of the overall budget.

Some budget hawks blame the Bush tax cuts for the deficit, but the taxes have stoked the economy and bolstered federal revenues. The deficit has returned to its historical level of about 2.3 percent of GDP, but that will not continue for long as the budget continues to swell uncontrollably. In a Tuesday speech to Columbia University, new Treasury Secretary Henry Paulson diagnosed the long-term risk we face regarding the budget:

The biggest economic issue facing our country is the growth in spending on the major entitlement programs: Medicare, Medicaid, and Social Security. The cost to the federal government of these three programs, without fundamental reform, is projected to more than double, from the current level, 8 percent of GDP, to nearly 17 percent by 2060. If left unchecked these programs would significantly impair our economic flexibility and erode our competitiveness.

Demographics don't lie and demographics aren't partisan. Social Security was created in 1935. Today, people are living longer than they did in 1935, yet Social Security's basic structure has barely changed. Just 3.3 workers are paying into the system to support each beneficiary, while 16 workers did so in 1950. The President put forward a plan last year to strengthen and modernize Social Security. The longer we wait to fix this problem the more limited will be the options available to us, the greater the cost and the more severe the economic impact on our nation. …
We've made progress, but the deficit is still too large. I wish it were less and I am working with my colleague and friend Rob Portman, the Director of the Office of Management and Budget, to restrain federal spending. But let's be honest with each other. The big budget issue is the longer-term structural entitlements challenge staring us in the face.

Paulson’s first public speech since his confirmation gives some hope that the Administration may finally get serious about spending in general and revitalize its efforts to reform entitlement programs. The White House did try to push on Social Security last year, hoping to get a solution passed outside of an election year. The reform effort stalled amid partisan bickering in Congress, but perhaps Paulson’s speech indicates that the effort will be renewed after the mid-terms.

For that to happen, it will take extraordinary cooperation between Congress and the White House, the Senate and the House of Representatives, and Democrats and Republicans. We have seen little of that spirit for quite some time, but at least Paulson recognizes the extent of the problem. That’s a necessary first step.