"The budget plan for fiscal 2007 underscores what budget analysts of all political stripes have been saying for years: The goals of balancing the budget, waging a global fight against terrorism and making Bush's first-term tax cuts permanent may be fundamentally at odds."
More from WP's federal budget analysis
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- pamela
- After three years in Nicaragua, I am back in Texas to pursue an MA in Latin American studies.
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10 comments:
The problem isn't cut taxes, its spending. It's telling that the Post spends the first half talking about inadequate taxation and bogeymen of Iraq and Afghanistan costs, and doesn't get to the unnecessary spending until the second half.
The problem is that congressmen (from both parties) get reelected by giving their constituents and campaign donors bread and circuses. These range anywhere from agricultural subsidies to extended benefits under a host of welfare programs to ill-conceived education initiatives to pork. Nobody dares to make the hard cuts that are needed because it would invariably get spun as disaster for such and such groups. Thus, they talk of raising taxes instead.
The Republicans stuck to their principles in cutting taxes. Unfortunately, they've also been spending like drunken sailors.
(Note: While I don't think the federal government should be involved in welfare (corporate, agricultural, or personal), social security, or education, I'm not opposed to local or state governments doing such things.)
A couple thoughts:
-I agree that Congress ought to spend tax dollars more wisely and quit using pork projects of various degrees of absurdity to make bills sweeter for representatives with little inclination to vote for them.
-One possible solution to the reelection issue might be to impose term limits for Congress. I don't think the founders ever envisioned lifetime politicians running things in DC. I wonder what you think about that?
-I'm open to the idea of local control of some of the areas of welfare you mentioned (esp. corporate and agricultural), but that opens a whole new can of worms, namely in the areas of property taxation and equity of welfare resource distribution. In Texas, no one will support a state income tax even if their property taxes are lowered by a significant percentage.
-If federal taxes were reduced with the understanding that states needed to take greater responsibility in some of these areas, I can imagine a large amount of resistance to that coming from some of the smaller and/or poorer states whose tax base is very limited. In that situation, I would hate for something like children's health insurance to be solely dependent upon a state's resources in say, Mississippi, for example. I don't think it's in the nation's best interest to let the health of children in some areas of the country suffer in the name of local control and lower taxes.
We're facing this right now in South Carolina. Property values, particularly near the coast, have jumped, so property tax assessments have also jumped. This is particularly hard on people who own a home that has been in their family for generations but could never afford to buy property in the same area at current prices. The state legislature is discussing measures for property tax relief, one of which involves eliminating property taxes altogether and raising the state sales tax. The main reasons this is a bad idea are 1)the sales tax is regressive; it has a much larger impact on the poor, who spend most of their income, than the wealthy; and 2)it means that local governments would be dependent on allocations from the state government for their operating revenue. The proposal to only reassess property for tax purposes when it is sold, transferred, or substantially improved sounds much more reasonable to me.
I think that part of the reason legislators spend so profligately is that they're mostly wealthy people themselves--you almost have to be to run a successful campaign these days. Our congressmen and women are generally not the sort who have ever sat down with a household budget to figure out how to pay the rent and grocery bills, so maybe a million here and a billion there just don't seem like such a big deal.
Pam,
I waffle on term limits. My concern is that it could make spending even worse and special interests/lobbyists even more powerful. The reason is because many congressmen tend to become lobbyists themselves after leaving office or go on to work at different companies they may have... ahem... benefitted in the past. If congressmen have an even shorter period of time to curry favor, they may be a little overgenerous with their favors towards special interests and ignore the voters. If we were to impose term limits, I'd be partial to making them generous... say, three terms for the Senate and 7 or 8 terms for the House. That way they won't be there forever, but they also won't feel like they have too short a time to accomplish whatever they want to do (good or bad).
I'd be more amenable to increasing the number of seats in the House. It's been stuck at 435 since 1911. At the time the ratio of rep to citizens was about 1 to 210,000. It's now 1 to 700,000. The House was supposed to be responsive to the citizenry and have a high turnover. Instead, the incumbancy rate runs at about 90% (in terms of people returning each year, not of those running for reelection, which is even higher). In the 2004 election, 392 of 397 reps running for reelection won. That's almost 99% and that's ridiculous.
There are several reasons I want local governments in control. The first is that I simply don't think there is any kind of Constitutional mandate for the federal government getting involved in welfare, education, and many, many other things. The 10th amendment explicitly says that any powers not given to the federal government nor prohibited to the states in the Constitution are the province of the states. That stupid welfare clause in section 8, though, has been completely blown out of proportion and I don't know how anybody can say that the Founding Fathers intended it to justify what it's been used to justify.
Second, the federal government isn't very good at things it shouldn't be doing. It's horribly inefficient, monopolistic, ineffective, and not responsive to either the program's needs or to the citizens' desires. The purpose of the federal government is to do what the states can either not do on their own or cannot easily do collectively, e.g. fielding a military, regulating interstate and international commerce, interact with other countries, print and regulate currency, etc.; basically the powers given to it in the Constitution. And most of those things it does well. The other things, though, it does poorly and should properly belong to the states.
Yes, the states will have to perform balancing acts with taxation and services, but that's the point. As it is, the states can provide all sorts of services but not be responsible for funding them. They let the Feds do that. If they're responsible for funding them, then they must also be responsive to the citizens. The Federal government is too massive and too distant to be responsive. (Keep in mind that if the states were doing this, federal taxes would greatly decrease.)
I think there should also be competition among the states for citizens and tax dollars. That means finding an appropriate balance between taxation and spending on programs they want to offer, more so than what they do now.
(Read this great anecdote about Davey Crockett for an illustration of the problems: http://dangerousdan.us/?p=298)
Anya, good point, but I don't think that accurately tells the story. You can see the same out of control spending habits among small time local reps, even down to the city and county levels. I think the problem is that reps tend to think of money available to the government as "the government's money" as opposed to the people's money which they're responsible for using appropriately. Thus, they believe that can spend it on whatever they want without consideration that they've been entrusted with something important.
What you say has some truth, I think, but it's unfair to attribute it to rich people being used to lots of cash. Anybody, when dealing with large sums of money, will lose perspective of the amounts and will start considering them as just numbers being moved around. When I worked for SBC, I dealt with sales commissions in the thousands and sales contracts in the millions and they didn't mean a thing to me. They were just numbers in the spreadsheet as far as a I was concerned.
Dan,
Going back to 101: It's nice to say that states could compete for citizens and tax dollars, but for that competition to mean anything we would have to assume that the citizenry had equal access to information about tax rates and services and equal mobility to take advantage of those differences. I believe the events of last year made it blatantly obvious that this is not the case.
I agree that the Federal government loses a lot to inefficiency, but there is also a palpable efficiency loss for business when there is not Federal preemption. Dealing with one regulatory and service regime is always simpler than dealing with 50. Even if each state ended up at similar balances in their support for citizens and industry, the debates and confusion that would be incurred by such a change would lead, in my view, to far less responsiveness than the current system.
And finally, it's all well and good to discuss cutting spending to manage current deficits, but there is still $8.2 trillion of public debt to contend with. I don't understand the logic that says one can manage ever-increasing levels of debt with ever-reduced levels of income, especially given the institutional inertia that you describe.
Dan,
Increasing the number of representatives in the House is an idea worthy of consideration, I think, if the goal is to enhance the direct access afforded constituents when politicians represent smaller populations. However, if the goal is also the efficiency of the federal bureaucracy, adding seats to an already titanic-sized body of elected officials seems like it would not do much other than add gridlock to an already slow-moving law-making body.
I understand your constitutional interpretation, but I'm sorry, I just don't agree with it. And EW's comments succinctly identify a few reasons why.
Anya,
I can't tell you how frustrated I am with our local and state governments for continually proposing 1/4 cent sales tax increases as a method to raise money for fill-in-the-blank (everything from roads to education). The regressive thing gets me, of course, but I also think people have such an individualistic mindset about their money that they don't want to think about how the collective needs of society could be better (and more fairly) supported by a state income tax.
EW,
I couldn't agree with you more, especially in regards to the state competition and debt issues.
I'm glad I have a professional economist like you for a friend. : )
EW,
People increasingly have equal access to information and it should be the responsibility of citizens to seek it out and they too can balance out various considerations and decide where they want to live. Sure, not everybody has equal mobility, but, to be honest, that doesn't concern me. As a libertarian, I think the responsibility of government is not to infringe on ability and opportunity (a negative duty), not to make sure people have those things in equal amounts (a positive duty); the latter is served by the former and any inequalities from non-governmental problems are not the government's responsibility to fix.
I'm advocating a severe cutback in federal responsibilities not given to the feds in the Constitution. Some things, such as regulating the economy, interstate commerce, etc., are given to it and should be maintained for efficiency. As far as efficiency goes, I find your argument odd only because there are still state and local regulatory schemes and services in addition to those at the federal level. That creates a multi-layered amount of red tape and inhibits business because they must deal with those 50 schemes in addition to the federal scheme. Why not get rid of one of the layers?
Due to "creative accounting," I don't think the public debt figure is very reliable (not saying it's not extremely large, just not reliable). We have to look at what's driving that deficit and much of it is massive federal programs, such as social security, medicare, and such. If those programs were discontinued (this is all hypothetical, of course, as such a thing will never happen), then the future deficit burden for them will no longer be the government's. Considering the increasing benefits and inflation, these programs will drive the debt ever higher. That we would still have the deficit if the programs are cut is not an excuse for not preventing it from getting larger.
Pam, yes, I should have mentioned the issue of the efficiency of the House with an increase in members. It is a worry and probably not resolvable.
You haven't given me a Consitutional interpretation, you've only said that you think there are reasons there should be exceptions to mine, and that doesn't count. What's your interpretation?
What do you mean "the collective needs of society?"
Dan,
Let me take your questions in reverse order.
By collective needs I mean health, safety, and education. It's in the best interests of society for those 3 things to be done as well as possible for everyone in a given jurisdiction. In the specific context of my previous remarks, I was thinking about how people in one school district resent their property taxes going to benefit people in another school district. If we had less property tax and a state income tax, I think education would be funded more efficiently and fairly for children all over the state.
As for my Constitutional interpretation, I embrace a Hamiltonian understanding of the general welfare clause, the current basis (since 1937 anyway)for congressional action outside its explicitly granted powers. Hamilton, as you know, was a Founding Father, so to suggest that the founding fathers would not support the current power that Congress enjoys is not entirely true. I'm sure, like you, they would be appalled by blatant abuses of congressional power, like appropriating funds in a tit-for-tat fashion.
Entitlement programs administered nationally like Social Security and Medicaid certainly need reform (just like the welfare system did back in the early 90s), but I don't think they should be eliminated entirely, nor do I think the states alone could administer these programs any better. And with the level of mobility in our society, I think these kind of programs are better off being handled by the feds. They certainly, in my view, fall within the scope of the general welfare clause.
I think all of us have an interpretation of the Constitution that is somewhat based in logical argument and somewhat based in our experience and intuitive judgment of what makes a good society. On some level, I favor taxation for social welfare programs because they benefited my own family growing up and kept us off the street. In addition, I don't see the private level of compassion rising to meet the needs out there, and if we're all taxed a little bit more to compensate, so be it.
Obviously the federal bureacracy did not do so well with Katrina, but neither did the Red Cross. The problem is not the government itself but the people running it. The problem is not the Red Cross, but the people managing it. It's much easier to place blame on a collective entity than to pinpoint the exact causes of inefficiency or corruption. Yes, the federal government has problems. So do states. So do cities. I think at the end of the day, all we really disagree about is how those problems should be distributed within the layers of government!
Those seem somewhat arbitrary, but ok. I actually don't mind income taxes that much, but would prefer flat tax. Before you think I'm out to get the poor but liking a flat tax instead of progressive tax, it would work such that no income under say, $40K is taxed. Then after that, it starts ramping up until it's about 15% by the time it hits $60K-75K. This would eliminate many of the loopholes the rick now exploit and ensure that they actually pay their share of taxes (which, for the rich, currently amounts to much less than it's supposed to since they can afford loopholes, tax shelters, and the accountants who can exploit them).
When I wrote it, I momentarily considered qualifying my statement about the Founding Fathers being appalled by the current size and scope of goverment since some, like Hamilton, didn't mind the welfare clause being expanded. I decided to keep it, however, because I still think that even those who weren't strict federalists never intended for the federal government to be as big and expansive as it is now.
The problem is with the government itself as well as the people running it. The government is the one social entity that is monopolistic, has no competition, has the ability to increase its own income, and has the coercive ability to accomplish its goals. The bigger and more monolithic such an entity is, the more inefficient and wasteful it will be because it has no incentive to streamline or to become more efficient. Thus, I'd prefer smaller units of government than a large centralized one with too much power and responsibility.
I'm also far less concerned with what government can do for me and others than I am with it can to me and others. Governments should be restricted and not constantly granted new powers and responsibilities. Each time that's done is a power (positive or negative) taken away from the citizens or a responsibility that the citizens have that has been passed off to the government. If the citizenry has a moral obligation to help the poor and gives that responsibility to the government, then it has abdicated that responsibility and accordingly feels it far less acutely than it should.
Dan,
It seemed to me that you were making the argument that handing more control over taxes and spending to the states would, beyond its perceived constitutional benefits, lead to a more efficient and optimal outcome. I am not making a normative judgment about the responsibility of government to provide those services, but rather a positive statement that the underlying conditions for competitive efficiency are not met, and therefore an efficient outcome will very likely not be reached. If you want to now say that you don't care about the efficiency of the outcome, that is your right, but you did bring it up in your argument.
I specificially used the term federal preemption to discuss regulations that entirely supersede the states. In particular, I recall the hearings on bankruptcy last year, in which companies BEGGED Congress to write overriding regulations so that they would have a single framework for dealing with debtors. I admit that there was a bit of a leap between that and my final statement, so allow me to clarify:
It is not simply a question of "peeling back a layer". If you remove federal control from most of the areas in which it currently acts, you require each state to enter into a long period of debate on that rebalancing, and in which every party will add to the cacaphony, and consumers and businesses will be left trying to base their economic behavior on a framework that has lost all certainty. This would take YEARS, or even decades, and there is no guarantee that the systems that will emerge will serve the needs of a population which continually does NOT fit into single state borders. It's a certain sustained cost for a very UNCERTAIN , possibly unsustained benefit, and that is why I don't think you can just go "poof! Reserved powers."
Finally, I wonder what creative accounting you think goes into the pricing of T-bills and bonds that isn't the case in the general market, but that's a side issue. The important thing is that you need tax income to pay interest and principal on our country's oustanding debts. That's it; end of story. Even if you were to eliminate all federal entitlement spending, the cost of paying the debts already incurred would not fall on the states. Ergo, I still can't understand why cutting out the tool to pay our historical obligations makes sense. Even the most generous estimates of economic growth that come from tax cuts do not assume that the revenue lost will be entirely regained from that growth. If I were deeply in debt, I wouldn't tell my bosses that they could pay me less because I switched car insurance providers and dropped my cable, or even if I found a cheaper apartment. I would use every penny I have to support myself and my creditors until my obligations were paid off. My goverment should work the same way.
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