How the Mess was Made

Read David Stockman's tirade about the 30-year fiscal war. Stockman says the U.S. is "hurtling irreversibly toward a budgetary crack-up...." Published in Politico, it nails everyone. This would be great fodder for any classes that covers public finance.

My only quibble is that Stockman doesn't offer solutions. By that I mean he's like a doctor who diagnoses obseity and declares with an ominous scowl, "Be less obese."

Of course! Our government spends more than it taxes, and the gap has been accelerating. But the policy solutions (spend less, tax more) are NOT THE POINT. The point is that the rules that govern fiscal policy-making are broken. If you did not get that message from Evan Bayh's retirement, then you are missing the forest for the trees.

The only discussion worth having now is: What new rules will restore sound policymaking?  There are two tests for rules. One, will the rule work and work robustly over time? Two, can the U.S. enact the rule?  The dilemma is that potential rules may never be able to pass both tests.  As an example, President Obama's "bipartisan fiscal commission" has already passed the first test, but there is a great deal of skepticism if it can pass the second test. Pay-go is another example.  Works for a while, but it has always proved non-robust. Alternatively, rule that would completely satisfy the first test are budgetary Amendments to the Constitution, but again political reality seems to make enactment of these near impossible.  What rules would you like to see?

Let's hope (and suggest) that the President's new commission includes a careful set of recommendations on rules, in addition to the policy options. We've been talking policy options for 30 years, with lone economists like Stockman screaming into the wind, and I don't think that conversation is working.

UPDATE:  Thanks to Asa Hopkins for noting the broken link (now fixed) which should be going to this URL:

http://www.politico.com/news/stories/0210/33412.html

Comments

[Asa Hopkins]

The link is http://www.politico.com/news/stories/0210/33412.html, I think.

[dlr]

I think you're right. A constitutional amendment is the only hope. One of the items included in the 'short list' of the 'Contract From America' is a balanced budget amendment, so that is sort of encouraging. In fact the whole Tea-Party movement, rebelling against the whole neo-con big government meme that has taken over the Republican party is encouraging.

Another item on their 'short list' is a limitation on the number of words there can be in a single bill, to the same number as were in the constitution, I think. A dumb idea on the face of it, but at least a serious attempt to limit bills to be of manageable size. It would have to be a constitutional amendment as well, to have any force, but if it were in place, it would certainly make our Congress-crooks a lot more accountable for their votes.

I could think of a lot of other changes that would help, a lot, but those two seem to be at least in play.

A third item that got talked about a lot as part of the 'Contract From America', although I don't think it made the short list, was to require Congress to enact all regulations if they are to have the force of law. That would help slow down, somewhat, the whole problem with unfunded mandates, especially if they actually were able to impose a word count limit on bills.

[dlr]

One possible improvement that I have been thinking about recently in the way government functions, would be to repeal the 17th Amendment - the one that specified that Senators were to be elected directly by the citizens instead of by the State Legislators.

I think the effect of this Amendment has been overall very harmful. Before it was enacted, the Senate acted as a brake on the growth of the Federal Government, since they were, literally, the representatives of the States.

Repealing the 18th Amendment wouldn't be as direct a path as a balanced budget amendment, to getting government spending under control. But it might be more effective in the long run. It's the old checks and balances idea. If Senate, House, and the Executive are all elected by the people, no Amendment, no matter how plainly written, would be an effective check on their unceasing push to centralize power and expand it. Just look at the Commerce Clause. There are a million ways to game a Balanced Budget Amendment, so, even if it was passed it would soon become a dead letter. Congress would just start setting up quasi-governmental bodies and 'guaranteeing loans' instead of spending directly; or passing laws as unfunded mandates.

The repeal of the 17th Amendment seems more promising in terms of being a long term fix, since it would change the basic motives of one house of congress.

[Stretchwithme]

How about we enforce the Constitutional limits on the Federal government that we already have? Of course, there is no enforcement mechanism, other than a Supreme Court appointed by the perpetrators.

I'd like to see an amendment that requires taxpayer approval of all spending and borrowing in proportion to how much tax they pay. We need to counteract the natural tendency of democracies to benefit the many at the expense of the few who pay the most taxes.

[louis vuitton]

The battle of ideas is not won or lost in Congress, or even in elections, but in the long assessment of history. Just ask Qeng Ho.

[louis vuitton]

The battle of ideas is not won or lost in Congress, or even in elections, but in the long assessment of history. Just ask Qeng Ho.