Restrain Runaway Spending with a Federal Taxpayers' Bill of Rights

Federal spending has leaped 25 percent since 2001, exceeding $20,000 per household (See Chart 1). Frustrated taxpayers are seeking ways to protect their family budgets from the federal budget. These taxpayers should look to Colorado.

In 1992, Colorado citizens revolted against their free-spending lawmakers by petitioning for a referendum to limit the growth of state government to the inflation rate plus the population growth rate. Voters quickly approved the Taxpayers' Bill of Rights (TABOR), ushering in a new era of fiscal responsibility and economic growth. Over the next decade, spending was reined in, taxes plummeted, and the Colorado economy became the envy of the nation.

Just as Congress followed the states' lead on welfare reform in the 1990s, it should follow the states' lead on spending limits. A federal Taxpayers' Bill of Rights would succeed where other budget reforms have failed. It would protect taxpayers' paychecks by forcing lawmakers to live under constraints--just like families, businesses, and state and local governments do. This paper explains how such a policy could work.

During the past decade, reforming the budget process has been an exercise in futility. Lawmakers who focus obsessively on a single $100,000 pork project pay scant attention to the overall budgetary framework used to allocate $2.3 trillion in federal spending. When budget process reform is finally debated, lawmakers focus more on protecting their committees' turfs than on fixing the budget problems. The rare (and overly arcane) reforms that are enacted are first watered down to irrelevance and then riddled with loopholes. All four reforms of the budget process that have been tried in the past decade have failed.

Pay-As-You-Go (PAYGO) Rules and Discretionary Spending Caps. PAYGO rules, in place from 1990 through 2002, mandated that any new law cutting taxes or expanding entitlements be balanced by equal tax increases or entitlement cuts. It was an abysmal failure: Mandatory spending actually grew faster after PAYGO was enacted. It failed because it limited only the creation of new entitlements, while allowing current programs--such as Social Security Medicare, Medicaid, and farm subsidies--to expand rapidly. Additionally, PAYGO placed barriers on tax relief, and Congress easily dismissed PAYGO rules when they became inconvenient.

Discretionary spending caps, written every three to five years, were more successful. Yet, even caps were too easily disregarded by lawmakers, who could exempt any program simply by labeling it an "emergency." In the House of Representatives, caps could be waived with a simple majority vote. Recently, Members of the House strongly rejected a measure that would have restored discretionary spending caps--effectively refusing to accept any statutory limit on their ability to spend tax dollars.

The Family Budget Protection Act. Proposed by several conservatives and moderates in the House, the Family Budget Protection Act (FBPA) contained over one dozen important procedural reforms.1 These included converting the concurrent budget resolution into a joint budget resolution (which would have the force of law), entitlement caps, point-of-order reform, enhanced rescission, and rules making it easier to save money in appropriations bills. Instead of a bias toward bigger government and higher taxes, the budget process would finally protect taxpayers. Regrettably, these reforms were overwhelmingly defeated in the House.

The FBPA was rejected, in part, because it was too arcane to be understood outside the Beltway. Lawmakers are typically interested in protecting their committees' turf and retaining their ability to distribute government benefits. Only a popular outcry from the voters back home will persuade most lawmakers to overcome their own bias and vote for fiscal responsibility. Because the FBPA was too complex to be understood by most voters, there was no popular push for it, and lawmakers were free to reject it without serious political consequences.

Balanced Budget Amendment. Unlike the FBPA, the balanced budget amendment is widely understood by the American people (which is why it receives broader support from lawmakers, despite being a more radical reform). The movement for a balanced budget amendment has stalled as well, not only because the budget reached surplus between 1998 and 2001, but also because constitutional amendments are extremely difficult to enact.

Additionally, a balanced budget amendment focuses on the wrong issue. The budget deficit is merely a symptom; runaway spending is the disease. The United States could balance the budget tomorrow by raising taxes to levels that would devastate families, businesses, and the economy. Instead of seeing deficit reduction as end in itself, lawmakers should focus on the runaway spending that creates the deficits and high taxes in the first place.

Trust Lawmakers to Cut Spending. Lawmakers continue to work within a budget framework designed 30 years ago to maximize federal spending. Many Members of Congress claim that they can cut spending on their own and do not need any budget process reforms or spending limits to enforce what they plan to do anyway. This viewpoint represents the triumph of hope over experience. These lawmakers are absolutely correct that people, not process, are ultimately to blame for runaway spending. However, persistent runaway spending provides ample evidence that lawmakers are unable to control spending on their own without outside constraints.

According to public choice theory, lawmakers have incentives to continually expand government. This is exactly what is happening. The current federal budget process requires no priority setting, no trade offs, and no difficult decisions. Families operate under external budget constraints, as does virtually every state government. It is naïve and ahistorical to believe that Members of Congress will resist the budget process pro-spending bias and reduce spending on their own.

A Taxpayers' Bill of Rights presents a simple, yet effective way to curb runaway spending. TABOR would limit the growth of federal spending to the inflation rate plus population growth. Rather than growing 6.4 percent annually (the average during the past five years), federal spending would typically increase by approximately 3.3 percent annually. Although this slower growth rate may not seem like a significant change, it would save taxpayers more than $4 trillion over the next 10 years (See Chart 2).

Limiting annual federal spending growth to approximately 3.3 percent is not too much to ask of Congress, especially considering that the federal budget has expanded by 30 percent in the past five years and contains hundreds of billions of dollars worth of wasteful and obsolete programs. The current $2.3 trillion federal budget would still be large enough to fund all current programs, and these programs could continue growing at the inflation rate plus the population growth rate. Programs that expand at faster rates would need to be offset by reductions in the growth rates of other programs.

Principle 1: A TABOR Should Restrict Spending Growth, Not Revenues. High tax rates devastate economies. Yet a law simply requiring low tax revenues without any spending controls is not sustainable because unrestrained spending would likely create unallowably large budget deficits until taxes would need to be raised. The simple truth is that federal spending determines the required level of taxes. Therefore, a law limiting federal spending is the most effective way to guarantee long-term tax relief.

Furthermore, lawmakers cannot exercise much control over tax revenues. Economic trends create short-run revenue fluctuations that make it nearly impossible to target a specified revenue level. A TABOR would be more effective by focusing on spending, which lawmakers can directly control.

TABOR spending restrictions can easily avoid two predictable problems: First, in order to prevent forecasting games, the TABOR inflation and population growth allowances should be a rolling average of the previous three years' rates. Second, TABOR should apply to outlays (actual expenditures) rather than budget authority (the credit limit Congress provides to an agency to spend down). Over the past few years, Congress has manipulated budget authority amounts to the point that they have become meaningless. Outlays are what matter because they are actual expenditures of taxpayer money.

Principle 2: TABOR Spending Limits Should Be Enforced by a Two-thirds Supermajority and by Sequestration. TABOR spending limits would be enforced during the budget resolution vote, as well as the vote on any discretionary appropriations bill or entitlement reform that would put total spending above the TABOR cap. (A projection of total mandatory outlays would need to be combined with the discretionary spending bills to arrive at the spending total.) Legislation violating TABOR would require a two-thirds supermajority.2

The two-thirds supermajority requirement recognizes that there will be rare emergencies (e.g., war) when Congress may need to spend more than TABOR allows. Setting the bar at two-thirds is low enough to clear during a national emergency or war, but high enough to prevent abuse. This policy would require Rules Committee reforms (or at least cooperation from the Rules Committee) to prevent the altering of this two-thirds requirement during key votes.3

If Congress exceeds TABOR spending without getting the two-thirds vote necessary to enact the spending override (for example, entitlement programs that spend more than projected), Congress could come back and cut spending elsewhere to remain in line with TABOR's limits. Otherwise, the Office of Management and Budget would sequester funds using preset sequestration formulas, which were used under discretionary spending caps and PAYGO.4

Principle 3: Congress Should Be Required to Budget for Emergencies. No spending restraint is legislatively foolproof, so there must remain a political stigma attached to bypassing the spending limits. However, if two-thirds of Congress had to override TABOR every time there was a small emergency somewhere in America, these overrides would become routine and less controversial. Requiring Congress to reserve room in the budget for the predictable emergencies would keep all but the most catastrophic emergencies from requiring TABOR overrides.

Principle 4: States Should Be Protected from New Unfunded Mandates. In a budget-cutting environment, lawmakers may be tempted to find savings by passing new unfunded mandates onto states. This is counter to TABOR's goal of reducing the cost of government. If Congress passes a new unfunded mandate, the TABOR cap should be reduced by the amount of federal money saved, as determined by the Congressional Budget Office.

Principle 5: Budget Surpluses Should Be Split Between Tax Rebates and Debt Reduction . The 1998-2001 budget surpluses induced a massive spending spree because these surpluses were portrayed as "free money" sitting in a pile waiting to be used. If TABOR successfully restrains spending and creates budget surpluses, lawmakers will surely be tempted to override TABOR and spend more on popular programs.

What if budget surpluses were automatically split between tax rebates and debt relief? Instead of spending "free money," lawmakers would be cutting the tax rebates to taxpayers as well as raiding a debt relief fund designed to reduce the debt burden passed onto future generations.5

Principle 6: TABOR Should Be a Statute, Not a Constitutional Amendment. While Colorado's TABOR is an amendment (and therefore well enforced), attempting to amend the U.S. Constitution would probably be a futile quest, which leaves reform by statute as the best option.

The most predictable objection to a Taxpayers' Bill of Rights is that the exploding costs of Medicare and Social Security will make restraining federal spending nearly impossible. These programs are projected to grow 6 percent annually, which would seem to bar lawmakers from capping total federal spending at an annual growth rate of about 3.3 percent.

However, this is exactly why the nation needs a TABOR law. If Social Security and Medicare are allowed to grow at the current rate, they will bankrupt the federal budget. Within a few decades, taxes will have to increase by the current equivalent of $10,000 per household just to pay for Social Security and Medicare--unless these programs are reformed.

Furthermore, excluding Social Security and Medicare from TABOR would deny the fundamental reality that budgets are about setting priorities and making trade-offs. These programs do not exist in a vacuum and cannot be considered separately from the rest of the federal budget. If lawmakers choose to let these programs grow at their projected rates, they will be forced to either eliminate every other federal program or raise taxes to economically devastating levels. Exempting these programs from TABOR will not avoid this mathematical reality. It will merely delay the painful but inevitable trade-offs.

This does not mean that lawmakers would immediately have to reform Social Security and Medicare before the nation has developed a consensus on these issues. These programs are currently growing approximately $20 billion per year faster than they would if they grew at a 3.3 percent rate that would be consistent with a typical TABOR allowance. Over the next few years, Congress could easily offset the $20 billion increases by eliminating the hundreds of billions of dollars of wasteful and obsolete spending in the federal budget.6 Those offsets would buy Congress at least five years to reform Social Security and Medicare before their costs begin to overwhelm TABOR spending levels.

The current federal spending spree is unsustainable; yet, Congress has rejected recent attempts to bring sanity to the budget process and encourage fiscal responsibility. A federal Taxpayers' Bill of Rights provides a simple, effective, proven model for spending reform. A TABOR would force lawmakers to live under spending restraints in the same manner that families, businesses, and state and local governments do. It would force lawmakers to set priorities, make trade-offs, and reduce wasteful spending. Colorado has proved that TABOR can restrain spending, reduce taxes, and facilitate economic growth. More than ever, a Taxpayers' Bill of Rights is needed to protect the family budget from the federal budget.

Brian M. Riedl is Grover M. Hermann Fellow in Federal Budgetary Affairs in the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation.

1. H.R. 3800. For a summary of the bill, see Brian M. Riedl, "Better Budget Reform: A Guide to the Family Budget Protection Act," Heritage Foundation Backgrounder No. 1758, May 17, 2004, at www.heritage.org/Research/Budget/BG1758.cfm .

2. Colorado requires a voter referendum to exceed the spending limits, which is more effective but less feasible at a federal level.

3. Of course, a congressional majority could circumvent TABOR by simply writing a new law altering TABOR and adjusting the cap. (This was done with discretionary caps and PAYGO.) In the absence of a constitutional amendment, such chicanery cannot be completely prevented. One of the most feasible ways to prevent such games is through political pressure to respect TABOR caps and restrict overrule votes to catastrophic emergencies.

4. Given that PAYGO exempted the vast majority of mandatory spending from sequestration, Congress should revisit sequestration formulas in order to guarantee sufficient room for these required spending cuts,

5. Lawmakers would not have to wait until the end of the year to cut taxes. They could reduce taxes any time in order to prevent a budget surplus from occurring in the first place.

6. For example, the federal government cannot account for $24.5 billion spent in 2003. This and other examples of government waste are detailed in Brian M. Riedl, "How to Get Federal Spending Under Control," Heritage Foundation Backgrounder No. 1733, March 10, 2004, at www.heritage.org/Research/Budget/bg1733.cfm.

Vice President's Remarks at a Dinner for Coburn

But we're here tonight for a very special reason, and that's to support Dr. Tom Coburn and make sure he's the next United States Senator from Oklahoma.

Book Review: Breach of Trush by Tom Coburn

Coburn shows that the ultimate power still rests with the people. Americans know that something is going wrong with our government. Unfortunately, while we often like limited government in general, we usually don't choose it in our particular case. If the electorate rewarded principle and punished pandering, much of what is going wrong in Washington could be made right. Coburn's persuasive and insightful book will surely motivate many to do just that, and that accomplishment may equal anything he did while in Congress.

CCAGWPAC Supports Tom Coburn for US Senate

The Council for Citizens Against Government Waste Political Action Committee (CCAGWPAC) today endorsed former Representative Tom Coburn (R-Okla.) in the general election for U.S. Senate in Oklahoma. CCAGWPAC previously endorsed Rep. Coburn in the Republican primary.

"Tom Coburn's strong anti-waste and anti-tax record resonates with the voters of Oklahoma," David Williams, a spokesman for CCAGWPAC, said. "As the general election nears, more and more Oklahomans will support him as the logical choice to protect their hard-earned money."

Dr. Coburn served in the U.S. House of Representatives from 1995 to 2001, fulfilling his self-imposed three-term limit. During that time, Dr. Coburn received a lifetime rating of 87 percent from the Council for Citizens Against Government Waste. A member of Congress with a rating greater than 80 percent qualifies as a "Taxpayer Hero."

ATR |Coburn Stands Strong for Oklahoma Taxpayers

Today, Tom Coburn, former Congressman and Senate nominee, was applauded by Americans for Tax Reform (ATR) , the nation’s leading taxpayer group, for his outstanding Congressional record. Coburn is running against Brad Carson (D-OK) for Senator Don Nickles’ (R-OK) seat in the U.S. Senate.

Coburn has received ATR’s seal of approval in the past as a "Hero of the Taxpayer" as a U.S. Representative from 1994 to 2000. He has also signed the group’s "Taxpayer Protection Pledge," a written commitment to the taxpayers in a candidate's state to oppose any and all tax increases,

"It’s really very simple. Coburn signed the pledge,"
said Grover Norquist , president of ATR . "He has never voted to raise taxes in the past and isn’t afraid to make a public commitment not to raise them in the future. Carson is a different story."

Tom Coburn for US Senate 2004

I am currently finishing [Dr. Coburn's book] Breach of Trust, and I am saddened and amazed at how low our government has sunk. However, I am impressed with the persistence of Dr. Coburn and a few others at maintaining their principles. I want to help in any way that I can with this effort." -- Mark Johnson

Citizen Magazine - Ring of Power

An ex-congressman saw how Washington transforms everyone within its circle into big spenders. He sees only one solution: dismantling big government.

Don’t look now, but it’s been a decade already since Republicans took control of Congress, breaking a 40-year Democratic lock on the House of Representatives. At the time, the big story was the GOP freshman class, which swept into the Capitol eager to shake up the system and begin the long-awaited project of dismantling big government.

They never got the job done. In fact, federal spending today—when Republicans control both the White House and Congress—is higher than it’s ever been. But some members of the class of ‘94 are still fighting the good fight, including at least one who’s not in office at the moment.

And he voices special dismay over members of his own party whom he found to be as profligate as the Democrats they’d decried as big spenders.

[The Republican] Leadership’s favorite argument in defense of excessive spending was "Clinton made us do it," and the dissidents in the alleged "perfectionist caucus" [Newt Gingrich’s derogatory term for Coburn and other budget-cutters] made the situation worse because they refused to accept the realities of compromise in representative government. While Clinton certainly made it difficult for us to reduce the size of government, he was hardly forcing us to fund some of his favorite programs at higher levels than he had requested. Between 1998 and 2000, the Cato Institute reported that our discretionary budgets exceeded Clinton’s requests by more than $30 billion.

Notice that word "addicted." Coburn doesn’t mean it as hyperbole. As a doctor, he sees a very real, very strong parallel between the political class and a less respectable segment of society.

When I came to Washington, I was troubled to observe so many similarities between the behaviors of drug-addicted patients and my political colleagues. In Washington, power is like morphine. It dulls the senses, impairs judgment, and leads politicians to make choices that damage their own character and the machinery of our democracy.

He doesn’t pretend that politicians who won’t risk a fight on principle now will find their courage later. ("When good government is something to be pursued tomorrow, then tomorrow never arrives; it is always after the next election cycle.")

Though most of his book focuses on what’s wrong inside the Beltway, he says "individual voters … are as much a part of the problem with government as ‘Washington,’ " and cites a famous quote of doubtful authenticity but undeniable wisdom: "A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves money from the public treasure. From that moment on the majority always votes for the candidates promising the most money from the public treasury"— leading ultimately to financial collapse.

No civilization in history that has indulged in a massive expansion of its central government has long survived. Unless members of Congress and the American people restore their allegiance to the constitutional principle of limited government, America will follow the path of other great civilizations that decayed because of their own excesses.

The message isn’t fun and doesn’t make for high TV ratings: As Coburn says, "CNN will never air alongside a ‘Showdown with Saddam’ segment a ‘Showdown with Unsustainable Government’ segment." But we’d do well to heed it, if we want what Benjamin Franklin said we had: "A republic … if you can keep it."•

Amazon.com: Books: Breach of Trust: How Washington Turns Outsiders ...

Reviewer: Michael Renzulli (Mesa, Arizona) - See all my reviews

In 1993, a Representative from Minnesota named Tim Penny wrote an excellent book titled "Common Cents" that gave an insider's view about the goings on in Congress from a Democrat's perspective. Penny gave a scathing account of the dealings of the Democrat-controlled Congress especially such movers and shakers like Tom Foley and John Dingle. Penny's book, accompanied with conservative talk radio, gave me reason enough to back the Republicans in their quest to gain the majority in the House and Senate. Almost 10 years later, this book is published has a theme similar to Penny's except this time its a Republican representative who the book's author. I saw what was coming when the Republicans caved on the government shut down in 1995 and in 1998 I switched to the Libertarian Party coming to the healthy conclusion that the two major parties want nothing more than power rather than preserving our liberties. In this book, Coburn pulls no punches and spares no expense to point out how D.C. really works. Coburn confirms much of what I had sensed was going during the time he served in Congress. He goes into the betrayal of Republican freshmen at the hands of people like Newt Gingrich, Trent Lott and Dick Armey (who somewhat redeemed himself as his final term in the U.S. House came to a close) as well as Democrat members of Congress. Coburn also points out the enormous pressure that members of Congress are under and ultimately have no incentive to do what they are legally sworn to do once taking office but does talk up members of both parties in Congress who don't by into the careerist mentality. Like Penny, I admire Coburn for his honesty. He states that it is only by electing people dedicated to principle rather than 'careerism' that the culture of hypocrisy in the Beltway will end. I personally think it will take a collapse of D.C.'s power structure before any major changes will come. A prime example of this is the growing numbers of people who refuse to vote anymore since many voters are coming to the conclusion that the electoral process is a rigged game. I somewhat agree with this sentiment. But if you want to read the truth about what really goes on, regardless of what your political

Amazon.com: Books: The Power to Destroy

From Library Journal

Death and taxes may be life's only true immutables, but nearly as certain is Lord Acton's aphorism, "Power corrupts, and absolute power corrupts absolutely." Roth (R-DE), chair of the U.S. Senate Finance Committee, and Nixon, his executive assistant, summarize the findings of the recent Senate investigation and hearings on the abuses of the Internal Revenue Service. Their work is intended as a shocking expos? of a government agency that has abused its considerable power, but the story is really just another illustration of how all large organizations ultimately become bureaucracies that spawn a culture of indifference to the very citizens they ostensibly serve. There is unintended irony here: this was a Republican-led investigation of an agency that perverted America's entrepreneurial spirit into bureaucratic autonomy and created nightmares for many private citizens who were unjustly treated. Easy reading that may have broad interest for the general public.AWilliam D. Pederson, Louisiana State Univ., Shreveport
Copyright 1999 Reed Business Information, Inc. From the Back Cover

In 1997 William Roth spearheaded the most extensive tax-collection reform effort in modern history. He initiated an investigation into the IRS and chaired congressional hearings that uncovered horrifying stories of abuses against taxpayers that shocked the nation. The legislation that resulted-the Internal Revenue Service Restructuring Act, which passed the Senate unanimously in May 1998-has ushered in what The New York Times called "the most sweeping changes in decades to an agency whose very function has long made it the most reviled in government."

* How the IRS-with a near-absolute authority granted by Congress-plays judge, jury, and executioner, depriving countless taxpayers of basic rights

* How the IRS assesses outrageous and arbitrary penalties that convert minor debts and innocent accounting mistakes into insurmountable financial liabilities

* How IRS managers in pursuit of goals and quotas drive agency employees to abuse their authority, to seize personal property and shut down small businesses, forcing honest Americans into bankruptcy

* How IRS employees, on their own authority and motivated by self-interest, ruin the lives of middle-class taxpayers while absolving large debtors of millions of dollars of outstanding tax liabilities.

* How confidential internal surveys and an agency-wide study of the ethics of IRS agents document a culture of corruption, deception, and fear

* How the IRS escapes oversight through institutional isolation and personal retaliation against those who have criticized or challenged the agency-including whistleblowers within its own ranks

Home Page for Rep. Walter B. Jones by dexteraNet

The national debt on October 05: $7,414,553,180,295.70

Your share of the national debt: $25,181.40

OpinionJournal - Featured Article

Drunken GOP Sailors
Even Bill Clinton and a Democratic Congress didn't spend like this.
Amazing as it may sound, the ostensibly small-government GOP seems totally oblivious to the fact that all this spending puts its future economic agenda in jeopardy.

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