A modest proposal
Don Quixote on Aug 20 2010 at 4:54 pm | Filed under: Uncategorized
In yesterday’s comments, Spartacus has a novel, and very interesting, idea on how to restrain government spending. I commend it to your reading and I suspect you will be intrigued by it.
I’ve been toying for years with a much simpler solution and I’d like your thoughts on it. Our government (especially at the federal level, but this would also work at the state level and maybe even below that) should be bound by two simple constraints.
First, it can’t spend more than it takes in. This one is obvious and should have been the rule all along.
Second, each year, before any decisions are made on taxing or spending, we (either by popular vote or by vote of our representatives) must establish what percentage of the gross national product we want to spend on our government at that level for that year. Once this rule and this number are established the politicians can argue all they want about how to raise the money and what to spend it on, but they could spend only as much on government as we’ve chosen to spend and not a penny more.
Granted there are some problems with this, not the least of which is the possibility of cheating in determining the GNP. But it would result in one number that everyone could easily understand and that represented what part of our nation’s income we want to spend on our government. Of course, if they wanted to the people could still choose to turn a high percentage of the nation’s income over to the government. But my guess is that people would be shocked at what percentage the government controls now and would vote for a much lower precentage.
Am I crazy or would something as simple as this actually help people understand what their government is doing and regain control over their government’s role in their lives?
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12 Responses to “A modest proposal”
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I agree with your first point. The usual argument against it is that the government must have the option for deficit spending in times of national emergency. Well, that could be handled. Probably a provision that the President must submit a declaration to the Congress, which must pass with a 2/3 majority. I would stipulate that the period of the national emergency must be specified, and a new declaration obtained if the time is to be exceeded. Perhaps a monetary value on the deficit as well.
Having said all of that, I know it will never happen. As thoroughly discussed in recent threads we; i.e., politicians, interest groups, and individuals are tragically addicted to free money and services. Hell, much of the world, from the UN to the most insignificant country, have become addicted to gifts from the U.S. Treasury. Manna from Washington has taken its place alongside the previously enumerated inalienable rights.
Meant to say 2/3 majority in the Senate. Don’t think you could hold the House to such a standard.
An economist I am not; However, there are a couple of problems with the “simplicity” of these proposals:
One: What exactly is the tax revenue? Most budgets are planned based upon PAST (or more accurately, predicted) tax revenues. A sudden change in the spending habits of people can/will change the sales tax revenue. Other sources of tax revenue can be just a fickle. While this is somewhat easy to guess at, it is still a guess.
Should a government suddenly lay off (or not pay?) teachers, police, etc. simply because not doing so will cause the govenment to go into deficit spending? With that uncertainty in employment who would want to work in government service? There is at least one reason cops in third world countries are so often corrupt – they don’t always get paid on time, or their pay does not keep up with inflation. Do we really want to create that situation here? (I am not saying that is the ONLY reason for corruption, it is just one reason of many in the third world. And, IMHO, Obama is doing enough to make the US a third world country, do we really need to help him get us closer?)
Two: By what reasoning should government spending be tied to GNP? Again, not being an economist I don’t see the connection. And, maybe there isn’t one, I just don’t see it. Certain government expenses are constant (or should be – such as the military, cops, schools). If the GNP goes down (or the voters decide to lower it one year), even if taxes go up the next year, hiring more cops, (or military folks) is not the same as keeping them on the whole time. We all know that a cop who just graduated from the Police Academy is not the same as a cop who has been on the force for over 15 years. Tying spending to the whim of the economy (or the voters) as suggested will cause this problem to occur often.
Three: Running a deficit is not, in and of itself, a bad thing. Don’t we as individuals take out loans? Most working Americans buy their cars, houses, college educations through the use of credit. Is this a bad thing?
Well, Yes and No.
Yes, credit is a good thing as it allows one to borrow money to make more money (i.e. a student loan, in theory, allows one to get an education to get a higher-paying job). Borrowing money allows one to live in a nice house NOW rather than saving money one’s whole life before having a decent roof over one’s head. (and this DQ, is related to the “angry” over inheritance tax. Some would like to see their offspring have an “easier” time or not have to borrow so much money and suddenly, Wham! the government comes along with its sticky fingers and takes some of this lifetime of earnings). Borrowing money allows one to drive to work instead of using undependable public transportation. These things happen because as individuals we borrow money. Restricting governemnt so that it can NOT take advantage of credit is not a good thing in my opinion.
No, credit is a bad thing if one goes too deeply into debt so that one is not sure how to ever get out of debt. If one has too many loans the bank will rightfully refuse to give you a loan (unless you were underprivileged, had bad credit, or were otherwise a BAD risk, then the government will force banks to give you a loan for a house you could never afford! but, that is a different issue.) If you have no clear way of paying off your debt then you are likely to stop paying loans and others are stuck paying for your lifestyle. And, soon, your lifestyle will, rightfully, take a plunge.
This later situation is where we now find our collective selves. The federal government is running up a higher and higher deficit with no end in sight. Creditors are not sure that they are going to get paid, businesses and individuals are not sure how these huge bills are going to be paid in any other way except higher taxes. That’s the problem – not a government budget run by using SOME credit – it is too much borrowing that is the problem.
Lastly, passing all the laws we want about balancing budgets, etc., will not make the politicians, who are entrusted to run the government, act any more responsibly. We, as voters, need to be more informed, more involved, and vote accordingly. Just as freedom isn’t free neither is running a democracy an easy task.
P.S. Off-topic. Did anyone else feel that the MSM rather downplayed the last US troop pullout from Iraq? I mean, come on, the US-led coalition has liberated an entire middle-eastern country (an area of the world where democracy is usually considered a foreign concept), gotten rid of a dictator who killed millions by starting a couple of wars, taught the folks there that they can have elections and live without fear (if not now, perhaps sometime in the future). I would like to think that we gave them hope and a future worth looking forward to. This is all due to the courage and determination of President Bush, is that why the MSM remains so silent on this American triumph?
“With that uncertainty in employment who would want to work in government service?”
Btw, that’s a feature, not a bug. Why would any sane society want to motivate people to government service?
“And, IMHO, Obama is doing enough to make the US a third world country, do we really need to help him get us closer?)
“
You forgot police unions fund Obama and his leftist minions, using public funding of police officers. Inflated salaries and benefits included. This ain’t the third world. For one thing. Obama is here, and not in Kenya with his half brother.
http://www.blackfive.net/main/2010/08/lawyers-suing-bloggers-save-rantburg.html
This is just a reminder of what and who we are dealing with.
No nostalgia for olden times. No Veil of Illusion over how the system can be trusted to work. This is what we’re dealing with, in actuality.
>>A sudden change in the spending habits of people can/will change the sales tax revenue. Other sources of tax revenue can be just a fickle.>>
I was interested to learn that this is the underlying reason for federal income taxes. Apparently, prior to the 17th (?) amendment, the federal government was funded by State governments, who collected from the people, then passed some amount (I don’t know the details of that arrangement) to the Feds. And apparently, the States weren’t all that prompt and willing to pass on the funds, leaving the Feds in a ditch when it came to funding wars. At least that’s my understanding. So in order to fund WWI, the instituted the federal income tax on individuals. I think it was supposed to be on a temporary basis, but I don’t know that. And of course, as with any government “temporary” program, it became permanent. And, by the way, there is also some question about whether it was passed by the appropriate number of states in order to become a Constitutional Amendment – which is the underlying principle for those who claim that they don’t have to pay it. Pretty interesting – if anyone knows any sources to fill in the many gaps I have in my information, I’d sure appreciate it…!
“Balanced budget”…is a tricky term. In accounting practice, the equation is simple – Assets = Liabilities + Owner’s Equity. So… if you own a house worth $100,000, a balanced budget would be $100,000 (asset) = 0 (liability) + $100,000 (owner’s equity). But…an equally balanced budget would be $100,000 (asset) = $100,000 (what you owe the bank) + 0 (owner’s equity). And all numbers in between. Additionally, it’s the usual practice to depreciate assets, since they normally decline in value over time. So just in the basics, you can have a “balanced” budget and be 100% in debt.
We approach it in one of two ways: base the budget on what was actually collected in taxes/revenue in the previous year, or determine a minimal budget and set taxes required based on that level of spending. The latter is what we’ve been doing – well, minus the minimal part. Somehow, it seems that what we need to do is set the minimal budget that we’ll accept on an ongoing basis, and then require some sort of major action to increase it – the 2/3 majority in the Senate, for example. Which is more practical – “here’s how much money I earn, so this is what I can spend”, or “here’s what I expect to spend, so my employer has to pay me this much”.
Maybe we should approach it differently. We elect people to Congress, and then when they run again, people want to know “what have you done?”. Glenn Beck had a show last week (filmed earlier) about Calvin Coolidge, who he says turned the depression of 1920 around. He did so by doing “nothing” – letting the system set itself straight. So maybe the answer is that we are expecting our Congressmen to _do_ too much. We pay them handsomely, and they report for work daily to _do_ something. Maybe the answer is to cut their work time available down. I understand the Texas Legislature meets for 3 months every two years. Suppose we limited the time Congress spent in Washington DC to … say… 6 months or less every year unless there was an emergency. Or less. The rest of the time, they’d spend in their own districts. Reduce the hobnobbing – they’re just opportunities for deal making. They have indeed become a den of thieves – let’s reduce their opportunities. We don’t really need as many laws as they seem to want to pass – I’m beginning to think it’s a case of “idle hands are the devil’s workshop”…!
The first thing to do, it seems to me, is return to first principles. Before you can control its spending, the federal government needs to be reminded that it is a “federal” government – not a national one – and it should damn well have its activities restricted to those federal areas enumerated in the Constitution. Which means there will be several enormous vacant buildings in Washington DC, but I’m sure somebody will find a use for them. The federal government needs to be gotten out of areas where its writ does not run – which is a hell of a lot of them, these days. This would automatically generate huge savings.
Government can’t spend more than it takes in. Fine, logical, and indeed should have been the case all along. Let’s couple it with: various levels of government – federal, state, local – cannot run riot in areas not reserved for them. Constitutionally, the federal government is the smallest and least powerful of our parasites. It only has a couple of jobs, and needs to concentrate on them. Close down Education, close down HUD, close down Fannie and Freddie, close down HHS – it’s a long list of BS, and 90% of it sh0ould be eliminated.
An annual election to determine how much of our substance we wish to spend on government is a good idea. Add to it that people would have a far better idea of the extent to which government is up their noses if we did away with the emergency wartime measure of withholding. (The war’s been over for 65 years, I think the emergency’s passed, it’s probably safe to eliminate this emergency measure now.) If everybody had to actually sit down and write a check drawn on their savings every April 15, so they could plainly see and feel the money going down the sewer, it’d be pretty damned amazing how quick government spending got under control! Like – within 48 hours.
(In fact, it seems to me that this is really the only thing we have to do to get things back under some form of control: knock it off with withholding. As a percentage of the American mass those of us who actually sit down and write checks four times a year, in which money is withdrawn from our account and given to the government – and we can actually see it happening in bank statements – constitute a small number. The rest of the people don’t know how badly they’re being robbed because they never knew they had the money, it’s gone from their paycheck before they get the paycheck. It’s just numbers, hen-scratchings on a pay-stub – meaningless. They never saw it. They never knew it was there. Hell – it never was there, for them. Taxes are notional to them, not real. There is no pain associated with them. Change that, and the world will change. Yes, DQ – that’s even simpler than your suggestions, and I think it really is that simple.)
As part of the return to first principles we knock it off with electing senators. That was never envisioned by the Framers – particularly John Adams, who was in love – for some reason – with the House of Lords. Maybe he saw it as assuring there would be some people around who has come to be called “skin in the game” to act as a moderating influence on the congress. Well, that idea went out the window when we decided for some reason that senators should be elected just as congressman are – only for longer. Put it back the way the Framers intended, and let senators return to being appointed by their states. This would be a powerful boost to restoring states rights – the Framers regarded states as far more important than the federal government, which is why they set it up that way – which would be a powerful boost toward setting limits and controls on Washington DC. (Again – the federal government was supposed to be the smallest and feeblest of our government entities – what happened?)
So maybe we have two simple steps to add: end withholding, and stop electing senators. Both of these will get the federal government – which is the biggest offender – back under some control.
States like Georgia already has a balanced budget in their constitution. They cannot spend more simply in a depression or recession. They have to cut back. Which they did, in funding for colleges, increases in tuition, etc.
The federal government bypassed the constitutional requirement with the income tax gig.
Senators like Kennedy, Byrd, and Kerry are already Senators for life. Popular vote didn’t do a damn thing in getting rid of aristocrats.
Never think slaves will vote out their masters. That’s not how it works.
Suek, you’ve a pretty good general knowledge of income tax history already. It was the 16th Amendment that gave Congress the permanent right to collect income tax, although it probably already had the responsibility under the Constitution – “…lay and collect taxes, duties, imposts, and excises, pay the Debts and provide for the common Defense and general Welfare of the United States.” And yes, it was the distrust of centralizing taxing power that got in the way. Periodically Congress did impose an income tax to pay for varios wars and were discontinued after the debt was paid. An excellent history is provided by the Tresury Dept at http://www.ustreas.gov/education/fact-sheets/taxes/ustax.shtml . Yout tax dollars at work. Many fine ideas here that I endose whole heartedly, not that that would do any good. I have a suggestion that would alleviate much of the gridlock and cost of government having the added benefit of having been done before. Increase the number of people represented by each Congressman. The Constitution first required a ratio of 1 Congressman to every 25K people. It is now approximately 1:600,000. An increased ratio would decrease the number of Congressmen in WDC and would eliminate thousands of Congressional staff jobs. It would also somewhat streamline the legislative process with fewer egos to stroke to get action. With electronic communications, it is much easier for Representatives and constituents to communicate in real time or nearly so making small districts obsolescent. Maybe Congressmen would not actually be required to be physically present in WDC to perform the job, thus removing Congress folk from the high pressure group-think created by power sinkholes. Just a thought.
Spartacus’ idea is a very exciting beginning. It might seem complex, but t’aint. The one being referred to by Don Q is at:
http://www.bookwormroom.com/2010/08/19/what-about-the-inheritance-tax/#comments
Comment #40
Charles, in comment #3, Point #3, is right, running a deficit isn’t necessarily a bad thing. We do it all the time with house loans and car loans.
But when it is the government, deficit spending tends to spiral out of control, and SOME form of absolute control must be put into place to slam that door shut. Certainly emergencies can arise where it would be beneficial to deficit spend on a national level: Another superpower declares war on us, say. Or a killer plague descends, causing total chaos.
Perhaps the government could declare a national emergency – in a time of sudden war, say – and deficit spend like crazy – but only for eighteen months. After that, suppose the voters MUST approve any continued deficit spending, every single year. Once the voters stop the spigot, the emergency deficit spending must begin to be paid for by Spartacus’ debt reduction language.
An alteration to Spartacus’ proposal to account for VERY SHORT TERM emergency deficits could be folded in easily, I think. It certainly is, at a minimum, a great starting point for debate on how to constrain our out of control national government.
Any proposal without Spartacus’ strict controls won’t solve a thing, I think…