Cato Testimony on Budget, Property Rights, and More

March/​April 1995 • Policy Report

In the first month of the 104th Congress, Cato Institutescholars testified before congressional committees some 16 times,as Congress became more receptive to proposals for limiting governmentand reducing spending. Excerpts from some ofthat testimony follow. To jump to the full textof each testimony, select the highlighted date.

16 Times in First Month

Stephen Moore, director of fiscal policy studies, beforethe Senate Budget Committee on January 25, 1995: Governmenttoday is our fastest growing industry. In fact, in 1992, for thefirst time ever, there were more Americans employed by governmentthan by the entire manufacturing sector of the U.S. economy. In1994 total government spending at all levels passed the $2.5trillion mark. One reason that figure does not spark a wholesalepublic revolt is that a trillion dollars is incomprehensibly large.Two and a half trillion dollars is equivalent to the value of allthe farmland in the United States plus the assets of the 100largest U.S. companies.

In the 21st century the role of government needs to befundamentally redefined. Over the past 50 years or so we have witnessedthe ascent of what I call a “culture of spending” inWashington. That pervasive culture needs to be replaced with a renewedethic of restraint. Here are some strategies for doing so.

    Begin to define constitutional boundaries for federal action. The U.S. Constitution confines Washington’s authority to spend money to a select few enumerated purposes, mainly protecting the security of the nation and preserving public safety. Those enumerated powers are defined in article I, section 8.

    Within the Constitution there is no grant of authority to the federal government to pay money to farmers, run the health care industry, impose wage and price controls, provide job training, subsidize electricity and telephone service, lend money to business or foreign governments, or build parking garages or tennis courts or swimming pools.

    In 1794 James Madison wrote disapprovingly of a $15,000 appropriation for French refugees, “I cannot undertake to lay my finger on that article of the Constitution which granted a right to Congress of expending, on objects of benevolence, the money of their constituents.” Throughout the first 100 years of the nation’s history, spending programs were rejected by Congress, the president, and the courts as outside the boundaries of the Constitution.

    Members of Congress take an oath to uphold the Constitution. When is the last time that a member of the U.S. Senate — even the most fiscally conservative — rose to challenge the constitutional legitimacy of a spending bill? The members of this committee are typically praised as guardians of the federal treasury. Ask yourselves, is there any spending program that you would oppose simply on the grounds that authority for the expenditure cannot be found in the Constitution? If not, why do we have a constitution at all for you to uphold?

    Restore America’s fiscal constitution by enacting a balanced‐​budget amendment.Make the tough spending‐​cut decisions today. The history of budget deals is one of deferring the pain of cutting the budget. Spending cuts are never forthcoming. We urge Congress to pull the tough spending reductions forward by imposing a 4 percent across‐ the‐​board rescission on all federal programs except Social Security for the second half of fiscal year 1995 through the end of FY96.Reduce the defense budget to reflect post‐​Cold War realities. The United States now spends five times more than any other nation in the world on the military at a time when we face no major adversary and no major national security threat.Enact market‐​based solutions to avert the coming crisis in Social Security. Allow workers to opt out of Social Security, but require them to put 12 percent of their wages into an independent retirement account. That could be done in such a way as to actually reduce the discounted present value of the federal government’s 75- year Social Security liability — which is several trillion dollars.

    If Congress were to implement sensible reforms to Social Security — such as raising the retirement age to 70 over time and indexing the benefits to inflation rather than wages — Wall Street would actually pay the federal government for the privilege of taking over the entire system. The return that the private sector could earn from the IRA contributions would, over time, more than compensate it for the cost of paying benefits to existing and future retirees. A several‐​trillion‐​dollar future liability of the government would vanish.

    Get business off the dole. A forthcoming Cato study estimates that corporate welfare costs taxpayers $85 billion a year.

Roger Pilon, director, Center for Constitutional Studies,before the Subcommittee on the Constitution of the HouseCommittee on the Judiciary on February 10, 1995:Uncompensated regulatory takings of private property have becomean immense problem across the nation. As federal, state, andlocal regulations have increased in number and scope, propertyowners have increasingly found themselves unable to use theirproperty and unable to recover the losses that result.

The problem begins, therefore, with the growth of governmentregulations that deny owners the legitimate use of their prop​er​ty​.It should end with the relief that courts might give in the formof compensation to those owners, as required by the FifthAmendment’s takings clause. Unfortunately, the courts have beenlocked into what the Supreme Court itself has called 70‐​odd yearsof ad hoc regulatory takings jurisprudence. As a result, theygive relief in only a limited range of cases. That means thatproperty owners, both large and small, bear the full costs of thepublic goods the regulations bring about, when in all fairnessthose costs should be borne by the public that orders the goodsin the first place.

As the voters made clear last November in race after race, theprotection of property rights is a burning issue on which they wantaction. The time has come for Congress to address that issue, to redressthe wrongs that have been imposed on individual owners byCongress itself and by countless state and local officials.

To do that, Congress needs to reexamine the vast regulatorystructure it has erected — largely over the course of this century — todetermine whether those regulations proceed from genuineconstitutional authority and whether they are consistent with therights of the American people to regulate their own lives. Moreimmediately, however, Congress needs to breathe new life into theFifth Amendment’s takings clause, making it clear to a Court tooencumbered by its past that the clause means precisely what itsays when it prohibits government from taking private propertyfor public use without just compensation.

The federal government, as every student of the Constitutionlearns, is a government of delegated, enumerated, and thus limitedpowers. Delegation from the people gives power its legitimacy. Enumerationlimits that power. Unfortunately, that doctrine of enumeratedpowers, which the Framers meant to be the centerpiece of theConstitution, today is honored in the breach. If we are to cometo grips with the problem of regulatory takings, then, the firstorder of business is to start thinking seriously about rollingback many of the regulations that are doing the taking. And themost fundamental way to do that is to revisit the doctrine ofenumerated powers.

But even if Congress were to do nothing about relimiting itspower in so fundamental a way, it must make crystal clear itsview that the Fifth Amendment’s takings clause is meant tocompensate owners when regulatory takings of otherwise legitimate usesreduce the value of their property. To do that, Congress should(1) provide a proper definition of “property,” makingit clear that “property” includes all the uses that gowith a holding; (2) provide a rationally grounded nuisanceexception to the Fifth Amendment’s compensation requirement,drawing a clear distinction between environmental harms and environmental amenities;and (3) require the public to pay for public goods. Today, thosegoods are “free” to the public because the costs fallon individual property owners.

William A. Niskanen, chairman, before the Joint EconomicCommittee, January20, 1995: A proposed budget that would increasethe federal debt or taxes should be approved by a broader consensusof Congress than that required for routine legislation. That isthe sum and substance of the balanced‐​budget, tax‐​limitationamendment now before Congress.

Consistent with the letter and spirit of the Constitution, theproposed amendment defines the rules by which the major fiscal decisionswould be made, not the outcomes of those decisions. The proposed amendmentwould not constitutionalize fiscal policy. The “automaticfiscal stabilizer” would still be effective; stronger‐​than‐​expected economic conditions would lead to a budget surplus, weaker‐​than‐​expectedconditions to a budget deficit. The amendment would requirebroader support for an increase in debt or taxes but would notrequire a balanced budget or prohibit a tax increase. The primarypurpose and effect of the proposed amendment would be to ensurethat a decision to expand the fiscal powers of the federalgovernment reflected broader support in Congress than that requiredfor routine legislation.

For the first 140 years of U.S. history, the federal budgetwas effectively constrained by two fiscal rules: the formallimits of the enumerated spending powers in the Constitution andan informal rule that the government could borrow only during recessionsand wars. At the end of the 1920s federal expenditures were 2.6percent of gross domestic product, and most of those expenditureswere for the military and the deferred costs of prior wars. Thecharacteristic budget surplus during peacetime recovery yearsconstrained the federal debt to 16 percent of GDP. Theconstraints on federal spending and borrowing also contributed tothe conditions that led to a roughly stable general price levelover that long period.

Over the past six decades, however, federal expenditures haveincreased to about 23 percent of GDP, and most of them are fornew forms of services and transfer payments. Larger and more frequent budgetdeficits (continuous since 1969) have increased the federal debtheld by the public to an amount equal to about 50 percent of GDP.And the general price level is now about 10 times the level atthe beginning of this period. That dramatic change in fiscal andmonetary conditions in my lifetime occurred without one amendmentto the Constitution that would authorize a change in the fiscalrules. Our effective constitution has been transformed into oneunder which Congress and the president may authorize any type oramount of expenditure and tax, subject only to the voting rulefor routine legislation.

The appropriate response to the erosion of the substantivelimits on federal fiscal powers is to approve more constraining votingrules on decisions affecting the budget totals. One should rejectout of hand the argument that such rules are inherently inconsistentwith democratic government.

Jerry Taylor, director of natural resource studies, beforethe Subcommittee on Interior and Related Agencies of the HouseCommittee on Appropriations, January 11, 1995:Last November the American people made clear their desire for asmaller, less expensive, and less intrusive federal government.The federal energy budget is one of the best places to beginkeeping faith with the American people.

Energy production and distribution, like other goods andservices in the economy, should be left to consumers and entrepreneursin the market, not “planned” by government bodies. Infact, the long history of government regulation, taxation, andsubsidization of oil, gas, and electricity makes abundantly clearthat shortages and energy crises are engendered by governmentintervention, not market failure.

Oil and natural gas today are cheap and plentiful, as theyalmost always have been when not subject to heavy government regulation.Although energy consumers have profited handsomely from the deregulatoryundertakings of the 1980s, much more can and should be done tomove energy from the dead hand of government planners to theinvisible hand of the marketplace. To that end, this Congress shouldeliminate the U.S. Department of Energy.

The problem with the DOE is not its administrative structurebut the very fact of its existence. A centralized federal agencyis dangerous because it offers “one‐​stop” centralplanning. The thousands of pages of regulations that emanatedfrom the DOE and its predecessor agencies in the 1970s are a testamentto the perils of federal bureaucracy. The privatization of energy decisionmaking,not DOE’s emergency preparedness program, is the nation’s“insurance policy” against any future energy challenge.

The DOE’s environmental responsibilities should be transferredto the Environmental Protection Agency, and its weapons‐​relatedresponsibilities should be handled by a smaller, independent,non- Cabinet agency. The rest of DOE’s programs should not besent hither and yon throughout the federal bureaucracy; theyshould be eliminated forthwith.

Corporate welfarism is an expensive and egregious burden onthe American taxpayer. Perhaps nowhere is that clearer than in theDOE budget for energy research and development. The federal government spends$7.1 billion annually on various research and developmentprograms for the energy industry, a blatant subsidy to anindustry more than financially capable of paying for its own programs.

It is important to keep in mind that energy is simply one ofseveral economic inputs, along with labor, capital, and othernatural resources. Often it makes economic sense to substituteone input for another. Today, for example, energy is oftencheaper than labor or capital, and it makes sense for manufacturers tointensify energy use and substitute that input for another. Thatis not “wasteful”; it is conservation of resources.

Sheldon Richman, senior editor, before the Subcommittee onLabor, Health and Human Services, and Education of the HouseCommittee on Appropriations, January 19, 1995:I am here to urge federal defunding of the Corporation for PublicBroadcasting. Many complaints have been lodged against thecorporation. It’s been said that a preponderance of the publicaffairs programming it supports is little more than propagandafor big government and the welfare state. It’s been called pork barrelfor the rich because most of the programs cater to the wealthierand better educated. And it’s been said that government subsidiescorrupt the recipients who dare not venture into areas that are unlikelyto win the favor of the grant givers.

Those are all valid points, but they do not constitute thefundamental objection to government support for the CPB.Subsidies to broadcasting fall outside the proper scope ofgovernment and, in particular, the enumerated powers delegated tothe federal government by the U.S. Constitution. In other words, theappropriation of money for the corporation is flagrantly unconstitutional.

Determining the constitutionality of any given government actis not a matter solely for the Supreme Court. Every member of Congresstakes an oath to uphold the Constitution. That oath has a very specificmeaning. It obligates every member of Congress to ask beforeevery vote on every bill, “Does the Constitution delegate tothe national government the power embodied in thislegislation?” If the answer is no, the bill should bedefeated.

In the days of the Founding Fathers, there was of course nobroadcasting, but there were newspapers, theater, and other formsof entertainment. Yet the Framers did not authorize the national governmentto subsidize those things because in their view it would havebeen outside the scope of a properly limited government.

Jefferson addressed the matter we are discussing today. In the VirginiaStatute of Religious Liberty, he wrote, “To compel a manto furnish contributions of money for the propagation of opinionswhich he disbelieves is sinful and tyrannical.”

Jefferson was referring to the establishment of a state churchand the taxing of citizens to support it, but his wisdom applies perfectlywell to subsidies for broadcasting. Virtually everything that is broadcaston National Public Radio and the Public Broadcasting Service issomeone’s opinion. Not everything can be broadcast. Someone makesa selection among all the things that could be put on the air.Ideology plays a part in that selection. Often the selections arecontroversial. How a news story is played on All ThingsConsidered or the MacNeil/​Lehrer NewsHour isinherently controversial. How the War on Poverty is portrayed ina documentary — to take a timely example — is by nature open todispute. There will never be universal agreement on thosematters. Thus, some portion of the American citizenry will, to useJefferson’s words, be “compel[led] to furnish contributionsof money for the propagation of opinions which [it]disbelieves.”

That is not fair. Moreover, it violates the First Amendment’sprohibition on abridging freedom of speech. Freedom of speech mustinclude the freedom to not speak, and that freedom logicallyentails the freedom to abstain from subsidizing the speech of others.The Supreme Court agrees that forcing someone to speak violatesthe First Amendment. Congress should understand that forcingsomeone to subsidize another’s speech likewise runs afoul of theConstitution.

Edward H. Crane, president, before the Subcommittee on theConstitution of the Senate Committee on the Judiciary, January 25, 1995:What I would like to do today is make the case for real termlimits, by which I mean three terms in the House ofRepresentatives and two terms in the Senate. The debate overthree terms versus six terms is not mere quibbling over atechnical issue. It is significant and substantive. It is aquestion of the people’s term limits versus the politicians’ disingenuous limits.The political energy behind the term‐​limit movement is the resultof the desirability of a citizen legislature. Americans believethat career legislators and professional politicians have createda gaping chasm between themselves and their government. Fordemocracy to work, it must be representative democracy — governmentof, by, and for the people. That means a citizen legislature.

To achieve a citizen legislature, it is imperative that ourrepresentatives in Congress — particularly in the House, which the Framersclearly intended to be the arm of government closest to thepeople — be not far removed from the private sector that, afterall, they are elected to represent. As Rhode Island’s RogerSherman wrote at the time of our nation’s founding, “Representativesought to return home and mix with the people. By remaining at theseat of government, they would acquire the habits of the place, whichmight differ from those of their constituents.” In this dayof year‐​round legislative sessions, the only way to achieve thatobjective is through term limits.

Three terms in the House is preferable to six terms for avariety of reasons. The most important one deals with thequestion of who seeks to become a member of Congress in the firstplace. America is best served by a Congress populated by people whoare there out of a sense of civic duty but would rather livetheir lives in the private sector, holding productive jobs incivil society, outside the governmental world of politicalsociety. Such individuals might be willing to spend two, four, oreven six years in Washington, but not if the legislative agendais being set by others who’ve gained their authority throughseniority. “Limits” of 12 years, which these daysamount to a mini‐​career, do little to remove that major obstacleto a more diverse and representative group of Americans seekingoffice.

We already have hard evidence that short, three‐​term limitswill enhance the democratic process. Proposition 140, passed by thevoters of California in 1990, limited the state assembly to three two‐​yearterms. The 1992 assembly elections witnessed a sharp increase inthe number of citizens seeking office, with a remarkable 27freshmen — with a striking diversity of backgrounds — elected to the 80‐​memberlower house of the California legislature.

A second major reason for a three‐​term limit is that itensures that the majority of those serving in the House will notbe far removed from their experiences in the private sector. Theywill bring to the policy issues of the day the common sense and practicalexperience of living in the real world that will lead to decisionsthat are truly in the public interest.

A third reason for the shorter limits is that the longer oneis in Congress, the more one is exposed to and influenced by the “cultureof ruling” that permeates life inside the Beltway. Groupslike the National Taxpayers Union have documented the fact thatthe longer people serve in Congress, the bigger spenders andregulators they become. That is just as true of conservatives asit is of liberals. It is also understandable. Members of Congressare surrounded at work and socially by people whose jobs are tospend other people’s money and regulate their lives. It is theunusual individual — although they do exist — who is not subtly butsurely affected by that culture.

Finally, shorter limits for the House are guaranteed toenhance the competitiveness of elections and, as noted above,increase the number and diversity of Americans choosing to runfor Congress.

In order for the concept of a citizen legislature to havemeaning, it is imperative that those serving in the legislatureliterally view their time in office as a leave of absence fromtheir real jobs or careers. That is the key to a successfulcitizen legislature. The incentives facing members of Congressshould never include concern about what other legislators mightdo in retaliation, or what special interests might do to their politicalcareers.