Tag: balanced budget

Utah Legislators Call for Fiscal Federalism

Tea partiers take note: at the forefront of any effort to reduce the size of the federal government should be the devolvement of federal programs to the states. Achieving this may seem like mission impossible given the states’ addiction to federal money. However, there are signs that the idea of returning the relationship between the federal government and the states to that which the Founders prescribed is starting to gain some currency.

On Friday, the president of the Utah Senate and the speaker of the Utah House of Representatives penned an op-ed in the Washington Post calling for the federal government to begin the devolution process. The authors want the states to have the right to opt out of federal programs and allow the states to keep the taxes their residents send to Washington to fund them. The states would then be free to fund and manage the programs as they see fit.

The authors call their idea a “modest experiment,” and indeed, it is hardly radical. The 10th amendment to the Constitution is clear:

The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

From the op-ed:

Let’s select a few programs – say, education, transportation and Medicaid – that are managed mostly by Utah’s government, but with significant federal dollars and a plethora of onerous federal interventions and regulations.

Let Utah take over these programs entirely. But let us keep in our state the portion of federal taxes Utah residents pay for these programs. The amount would not be difficult to determine. Rather than send this money through the federal bureaucracy, we would retain it and would take full responsibility for education, transportation and Medicaid – minus all federal oversight and regulation.

Such a notion terrifies proponents of big government because state budgets are generally constrained by balanced budget requirements, debt inhibitions, and the inability to print money. States are also more limited in how much they can abuse taxpayers for the simple reason that citizens can move to a friendlier environment. Indeed, one of the beautiful aspects of returning to fiscal federalism is that it would strengthen this competition that $600+ billion in annual federal subsidies has somewhat neutered.

See this essay for more on fiscal federalism and this Cato Policy Analysis on the problems with federal subsidies to state and local governments.

Update: A C@L reader pointed me to this resolution introduced by Michigan state representative Paul Opsommer, which calls on the federal government to allow the states to opt out of federal highway programs funded by the federal gas tax. The states would be free to fund their own roads with their own gas tax revenues instead of sending money to Washington where its then redistributed back to the states according to Congress’s politicized wishes. As the resolution notes, the federal government uses the leverage it has over transportation spending to force the states to enact policies that they don’t want.

The Problem Is Spending, not Deficits

Reckless spending increases under both Bush and Obama have resulted in unprecedented deficits. Congress will soon be forced to increase the nation’s debt limit by an astounding $1.8 trillion. Government borrowing has become such a big issue that some politicians are proposing a deficit reduction commission, which may mean they are like alcoholics trying for a self-imposed intervention.

But all this fretting about deficits and debt is misplaced. Government borrowing is a bad thing, of course, but this video explains that the real problem is excessive government spending.

 

Fixating on the deficit allows politicians to pull a bait and switch, since they can raise taxes, claim they are solving the problem, when all they are doing is replacing debt-financed spending with tax-financed spending. At best, that’s merely taking a different route to the wrong destination. The more likely result is that the tax increases will weaken the economy, further exacerbating America’s fiscal position.

No Balanced Budget, No Raise

Ben Goddard writes in The Hill about the new taxpayer revolt in California this week. The political establishment put together a package of initiatives that it thought would fix the budget process there – but the people weren’t buying it. The only thing they passed was the measure to ban salary increases for legislators if they didn’t balance the budget.

There are similar proposals floating around Capitol Hill. If bills were subject to a popular vote, it seems like such a thing would be likely to pass.