Taxes & Spending

Federal Government Needs Fiscal Straightjacket

The U.S. House voted this month on a package of budget reforms that could have saved taxpayers tens of billions per year, and would have gone a long way toward balancing our insanely indebted budget. So naturally, Congress voted it down overwhelmingly. Sadly, fewer than 100 members–not even half the Republican majority–voted for budget discipline. I am referring to the Family Budget Protection Act (FBPA). Sponsored by Republicans Chris Cox of California, Jeb Hensarling of Texas, Paul Ryan of Wisconsin, and Chris Chocola of Indiana, this bill would have helped to restore expenditure controls in Congress. It also would have created tools for eliminating wasteful and obsolete government programs. The bill’s supporters recognized that if American families and businesses must live within a budget, so must Congress. It took nearly 200 years–from 1789 to 1987–for Congress to run up the annual federal budget to $1 trillion. But in just the last dozen years, the annual federal budget has grown another $1 trillion. There is a lesson to be learned from states that have managed to curtail spending: Budget rules that deny lawmakers the power to spend and tax recklessly can be effective deterrents to fiscal irresponsibility. Here are the reforms needed at the federal level:

  • Tax and Expenditure Limitation: This is the most crucial reform. There needs to be constitutional caps on federal spending and taxes to limit the growth of government. Colorado, for example, has a spending limit that caps expenditures at population growth plus inflation. It has been a useful fiscal straitjacket that has saved Colorado taxpayers hundreds of millions of dollars. In recent years, federal spending has been growing at about twice the rate of inflation. A constitutional spending cap would roll that rate back.
  • Balanced-Budget Amendment: We need a balanced-budget amendment to the Constitution now more than ever. Some opponents of a balanced-budget amendment argue that because we have such a big deficit, we cannot achieve a budget where expenditures match receipts. But these are the same people who argued a few years ago that an amendment was not necessary because we had a surplus. Every state but one requires a balanced budget. Why not Uncle Sam?
  • Challenge the Constitutionality of Programs: Where does the Constitution grant Congress the power to spend money on swimming pools, Beef Jerky TV advertisements, parking garages and midnight basketball leagues? The powers of the federal government to spend money are enumerated in the Constitution, mostly in Article I, Section 8. They include the authority to “establish Post Offices and post roads . . . declare War . . . raise and support Armies” and other mostly national-defense-related activities. Members of Congress take an oath to uphold the Constitution. They should start taking that oath seriously. When dubious spending programs come before them, they should ask: Is there constitutional authority for Congress to appropriate this public money?
  • Limit Congressional Terms: A Cato Institute study by Aaron Steelman finds that the longer Republicans stay in office, the more supportive they are of higher spending. Term limits would seem to be a critical political reform if the budget is to be truly trimmed over time.
  • Line-Item Veto: The FBPA would restore the power of the President to line-item veto wasteful and parochial spending projects, which have multiplied in number and in cost in recent years.
  • End Baseline Budgeting: The FBPA also would end so-called “baseline budgeting,” which starts the budget process for each agency at its current level of spending, thus allowing federal programs to grow each year on automatic pilot.
  • Sunset Federal Programs: Federal agencies should not be immortal. Why not enact a law that ends programs automatically after five years, compelling advocates of the program to make a new case for it to Congress if they want it to be reauthorized?
  • Independent Audits of Federal Agencies: The General Accounting Office reports that most federal departments cannot pass a basic audit that every business must pass. The books of federal agencies make Enron’s look clean and lawful by comparison. Tens of billions in federal spending each year is wholly unaccounted for. Medicare and the food stamp program send out billions in erroneous payments. Congress should mandate that any agency that cannot pass a basic business audit would be ineligible for a budget increase in the next fiscal year.

Republicans used to have an excuse for runaway budgets: they didn’t control the purse strings. Now bloated spending is happening on their watch. In their decades of dominance, Democrats changed congressional processes to enhance their policy goals. Republicans have so far failed to do the same. Unless their talk about smaller government is so much eyewash, they should put in place budget reforms that put taxpayers’ interests first.

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