*Editor's note: This story has been corrected.
Four years ago, Democrat Bill White ended a successful stint as mayor of Houston and quickly launched his campaign for Texas governor. His Republican opponent, Gov. Rick Perry, won that race with a campaign that focused largely on painting White as an Obama-style liberal bent on overspending.
In his new book, America’s Fiscal Constitution, White counters that depiction by blasting both the current president and his predecessor for a lack of fiscal discipline. Over the course of 408 pages, White frames the country’s increase in debt spending since 2001 as reckless and unlike anything in its history. He calls for “budget reformers” in both parties to push for pay-as-you-go spending and balanced budgets.
White is currently a senior adviser for Lazard Limited, an investment firm. He previously served as U.S. deputy secretary of energy in the Clinton administration.
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The following is a transcript of the conversation that has been edited for length and clarity.
TT: How did this book come about?
White: I’d noticed that the budget policies of the federal government after 2000 were a radical departure from the past and that story had not really been told. I’ve always viewed fiscal discipline as a core progressive value because you want to preserve opportunities for the future, and yet it seemed as though the traditional progressive and conservative voice on routine borrowing had been silenced.
TT: In our current politics, Republicans tend to dominate the discussion on fiscal discipline and debt spending. Do you think that’s an instance where your party has lost its way?
White: As described in my book, the collapse of fiscal discipline occurred in 2001, when Republicans controlled both the White House and Congress. During the current fiscal year, fiscal year 2014, both the House Republicans and the Senate Democrats proposed spending far in excess of available tax revenues. So neither party has a good claim to the historical mantle of fiscal discipline.
TT: One of your recommendations is to have voters approve any debt-financed appropriations made by Congress, which is similar to what happens in Texas and other states. Perry has often said that the federal government could learn a lot from how states operate. Is that one area where you two agree?
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White: Texas has used debt far more aggressively in the Perry administration than in all other Texas administrations combined. I’m not quite sure I agree with Perry on how he’s used state debt. Virtually all city, county and state governments in the United States vote separately for tax-funded and debt-funded appropriations in order to make clear the amounts funded with debt. The federal government is virtually alone among American government entities in [voting] to spend money then decide later how to pay for it.
Often voters throughout American history have been willing to pay for taxes earmarked for particular purposes. Those purposes include, on occasion, servicing debt for long-term investments. But today, many Americans are unaware that the federal government borrows for routine operating expenses such as Medicare.
TT: The growing cost of Medicare is something you bring up frequently in the book. Is that an area you feel hasn’t drawn enough attention nationally?
White: Much of the press covers the continuing battle about the Affordable Care Act. But for decades, federal officials and budget experts have known of the fiscal threat imposed by the Medicare bills for retiring baby boomers without some designated source of taxation or accumulated reserves to pay for those bills. The resolution of that issue will determine whether the nation continues to compound interest on the federal debt.
In the long run, neither progressive nor conservative goals are enhanced by using debt to disguise the cost of Medicare. Progressives who support a social safety net should insist that those opposed to taxation propose corresponding spending cuts and face the electoral consequences. People who want to restrain the growth in medical spending ought to want the cost of that spending to be made more obvious in a price fully reflected in taxes.
TT: Your book provides a kind of alternative history of the United States focused on its use of debt. I wonder if that’s an area you feel that Texas students should be focusing on more in school?
White: Much conventional political history is based on political rhetoric rather than budget numbers. But those numbers reflect actual governance. And in the past, those seeking the support for new government programs made the public case for both that spending and the associated amount of taxation. Since 2001, the parties have tended to have separate spending and tax policies, which makes it difficult to have a genuine public debate about the trade-off between spending and taxation.
TT: You argue throughout the book that most Americans have a somewhat skewed view of major points in American history, such as Herbert Hoover’s handling of the Great Depression and Ronald Reagan's position on tax cuts.
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White: The history of the Great Depression and New Deal has fostered a number of myths. Even before he was president, Herbert Hoover espoused a progressive ideal that the government should save an amount of surpluses during normal economic times in order to expand public works during downturns. This was before [John Maynard] Keynes was writing on the subject. And Franklin Roosevelt continued Hoover’s policy of separating the budget into two different parts: One part was routine spending funded by taxation, and another part consisted of relief and recovery programs that were funded by debt and designed to end promptly once the economy recovered.
One problem we’ve had in the last dozen years is the failure to distinguish between programs designed for economic recovery and normal federal spending. As a result, many people think that the debt incurred between 2001 and today is almost attributable to two wars and the response to the great recession of 2008. In fact, those extraordinary uses of debt account for only about half of the borrowing since 2001. The balance has been used for routine federal spending, including the expansion of Pentagon capabilities not directly related to the two wars, and the expansion of Medicare.
In 1981, both President Reagan and congressional leaders believed that high rates of inflation would continue and push taxpayers into much higher tax rates so that the 1981 reduction in tax rates would not require additional debt, or much additional debt. In 1981, Reagan never argued that debt should be used to finance tax cuts. And when Congress voted to pass the tax cuts, its own analysis showed that tax revenues would continue to soar as inflation pushed people into higher tax rates. So when the Federal Reserve was able to sharply reduce inflation, Congress did not want to go back to the tax rates, which had hit the middle class and distorted investment decisions, and both Reagan and Congress struggled to find places to cut in the budget. But they both recognized the need to balance a budget. That differs from what occurred in the [George W.] Bush administration.
TT: What is your view on the debt ceiling debates and the recent government shutdown?
White: The debt ceiling has been the basis of pure theater, part comedy and part tragedy. Congress has voted to spend money and has the exclusive power to set tax rates to a certain amount of revenue to pay for that spending. When Congress votes to spend more money than available tax revenue, then debt is the only financing available. So it’s silly for a majority in Congress to vote to spend money exceeding tax revenue and then have some members claim to be fiscally responsible by opposing the debt to pay for that spending.
My book describes how this bizarre practice evolved, almost by accident. For most of the nation’s history, Congress voted to incur debt at the same time that it voted for spending the required debt financing. Cities and states do that, continue to do that. And Congress should have the same procedure.
TT: You have a book here warning against debt and overspending. Wendy Davis has come out for “open carry” of handguns. These are not the type of views you hear from Democrats nationally. Is a Democrat in Texas simply less liberal?
White: You can find many progressive voices throughout Texas history, people such as Ralph Yarborough and Gov. [Ann] Richards and Congressman [Henry] Gonzalez. But progressives, historically, never believed you could sustain ongoing public expenses without tax revenue. That’s just common sense. It’s neither conservative nor liberal.
Most people can agree that in the 1950s and 1960s, Texas was far from a left-wing state. And yet the state had severance taxes on oil and gas that were higher than those today and produced a greater percentage of the state’s budget. Texas business leadership realized the need to fund a strong system of higher education and when Ben Barnes was lieutenant governor (and no particular darling of liberals), the state increased its severance taxes in order to fund education. State business leaders supported higher motor fuel taxes in order to fund a transportation infrastructure that benefited everyone.
In Texas, we believe that able-bodied people ought to work, and we’ve never had much of a social safety net for those who are of working age and are not disabled and simply don’t have a job or have a job with low income. But we’ve always believed that it’s necessary to invest in the future of the state and that that isn’t free.
TT: You were the Democratic Party’s gubernatorial nominee in 2010. Do you feel that Texas is ready to elect a Democrat statewide?
White: I hope that’s true.
TT: Is Davis the right candidate to make that happen?
White: As a state senator, she represented a district which reflected the range of the incomes and ethnicities and partisan orientations in many ways that is reflective of our state. And so there will be attempts to paint her views in a different light than were perceived by the people who she served. And, as in the 2010 campaign, there will be many Republicans who prefer to campaign against the president rather than to say what they have done in order to take higher education to the next level or deal with daily issues facing many Texans such as being stuck in traffic.
I’m not a professional handicapper of elections, but history tends to be on the side of common sense and a competitive political environment. And that’s where I believe Texas will wind up. I’ll let pundits decide the timing of all that.
TT: It’s not unusual for a politician to write a book ahead of launching a bid for office. Do you have any plans to run for office again?
White: Anyone who reads the book knows it’s neither partisan nor particularly political. People can serve their fellow human beings in a bunch of different ways including building businesses and nonprofits, as well as encouraging good candidates to run and supporting them. I like building businesses, and I enjoy the energy business, so I’m not one of these people who is sitting around trying to figure out what to run for next.
*Editor's note: The original version of this story incorrectly quoted Bill White as referring to former U.S. Rep. Charles Gonzalez. He was referring to former Rep. Henry Gonzalez.
Disclosure: Bill White was a donor to The Texas Tribune from 2009 to 2012. (You can also review the full list of Tribune donors and sponsors below $1,000.)