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Commentary

Curbing Over-Indulgent Government


     
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It’s time for Washington to sober up.

Some 15 years after then-President Bill Clinton declared the era of big government “over,” President Obama implored the newly established National Commission on Fiscal Responsibility and Reform to find ways to fix Washington’s growing balance sheets. The President warned that reining in government spending involves “politically difficult decisions”—so difficult that he handed the task over to an unelected commission with little power and no accountability.

The mandate of the bipartisan commission, established by presidential executive order rather than law, is to put forward proposals to balance the budget by 2015 “excluding interest payments on the debt” and to “examine changes to address the growth of entitlement spending and the gap between the projected revenues and expenditures of the federal government over the long term.”

Unfortunately, Washington has played such games before: some 11 times during the past century, according to one estimate, including the 1982–84 Private Sector Survey on Cost Control (the so-called Grace Commission), the 1983 National Commission on Social Security Reform (the Greenspan Commission) and the 1993 National Partnership for Reinventing Government (originally known as the National Performance Review). They all produced similar results: great expectations, many good ideas, but ultimately little lasting impact. Debt continued to mount and no one was to blame.

President Obama inherited the bulk of the national debt and many of the abuses that have led to out-of-control government spending. But the current administration and Congress have added to the problem, with projected cumulative deficits over the next decade adding another $8 trillion to the debt.

Congress just recently increased the debt limit to nearly $14.3 trillion, equal to approximately 100% of the U.S. gross domestic product (GDP). During the first six months of the current fiscal year, October through March, interest on the debt cost taxpayers some $202 billion. Fiscal reform is meaningless if Congress excludes debt service from the commission’s considerations.

The real trouble, however, is that budget deficits are not an isolated ailment. Deficit spending is a symptom of a much larger structural problem of the machinery of politics. The nature of the political process is myopic spending on the behalf of special interests at the expense of the public.

Powerful unions, teachers, police, mayors, insurance companies, the banks, and many others make demands on the public purse with no requirements to raise the necessary revenues to fund these projects. Deficit spending facilitates government growth by perpetuating the illusion that public spending programs produce something for nothing. Greece and other countries that are now drowning in debt are doing so for precisely the same reasons: because the rules of the political game encourage politicians to spend freely.

Washington needs to rebalance the scales in a way that avoids inhibiting the economic recovery and without increasing the burdens on taxpayers. This means creating limits on the abilities of Congress to over-indulge.

We have seen enough failed commissions by now to know that it’s going to take something more to curb Washington’s spendthrift ways, perhaps a balanced budget amendment to the Constitution restricting congressional spending to estimated tax revenues.

If President Obama is sincere in his desire to “take a hard look at the growing gap between what the government spends and what the government raises in revenue,” as he put it, a balanced budget amendment would give credibility to the rhetoric.

Getting America’s fiscal house in order also will require Washington to come to grips with Social Security and Medicare. These entitlement programs are massively underfunded, imposing huge debts on current and future generations of taxpayers.

Despite the political unpopularity of such action, serious structural changes need to be made in both programs—reforms that go far beyond the recommendations likely to come from National Commission on Fiscal Responsibility and Reform.


Emily C. Skarbek is a Research Fellow at the Independent Institute, founding Director of the Institute's Center on Entrepreneurial Innovation (COEI) and the COEI Government Cost Calculator, and Lecturer in the Department of Political Economy at King's College in London, England.






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