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The Federal Spending Machine

The Federal Spending Machine

Senator Tom Coburn (R., Okla.) on Thursday tried to get the Senate to rescind some of this year’s pork barrel spending. His purpose was to provide funds to help rebuild devastated Louisiana and Mississippi without going further into deficit.

The Senate decided to keep the pork. The vote wasn’t even close, 82-15 to be exact. (see linked article). Senator Ted Stevens, (R., Alas.), president pro tempore of the Senate (i.e., the senior member of the majority party and thus fourth in line for the presidency), was so outraged at the idea that he threatened to resign from the Senate if Sen. Coburn’s proposal passed. So a $220 million bridge to an island with a population of 50 will be built in Alaska, and the once-busy bridge over Lake Pontchartrain, now in ruins, will have to find the money elsewhere, which is to say in the bond market.

It is conventional wisdom that the Democrats are the big spenders and the Republicans are the penny pinchers. Fiddlesticks. Republicans just want to spend big on different things than Democrats want to spend big on. In fact it is the majority party that always wants to spend and the minority party, which has no control over the congressional agenda, that calls for fiscal restraint. Both parties are all in favor of spending on popular local projects—museum parking lots, sculpture gardens, animal rescue shelters, etc.—that are, or at least were, totally outside any area of federal responsibility.

How did this happen? Simple. It’s called democracy. The Founding Fathers, looking at English history from the perspective of the still aristocratic late-eighteenth century, saw that it had been the king who had always been the engine of spending. Indeed, Parliament had come into existence in the Middle Ages precisely as a check on the king’s natural extravagance. The very rich represented themselves in the House of Lords, the merely affluent sent representatives to the House of Commons, and the vast mass of the people without property were not represented at all.

The king was expected to “live on his own," funding the normal operations of the government out of income from the crown lands, and had to come to Parliament for extra funds. Since the members of Parliament, in granting the king new tax revenues, would be quite literally spending their own money, they were not inclined to be generous.

Thus the Founding Fathers thought the President would be the big spender and Congress would be the check on his extravagance, because the states all had property qualifications, restricting the franchise to those with assets that could be taxed.

But within two generations all adult white males could vote, and members of Congress increasingly sought their votes with increased spending. It has not just been bridges to nowhere in Alaska and dog shelters in Rhode Island. One of the prime reasons that Social Security is headed for insolvency is that Congress kept upping the promised benefits without providing the necessary tax money to pay for them. The bill, after all, wouldn’t become due for years. It is Scarlett O’Hara who is famous for saying that “Tomorrow is another day,” but the phrase might well be chiseled into the marble of the Capitol Building.

What to do? There are several simple changes in current law, some statutory and some constitutional, that would go a long way toward changing the spending culture in Washington. Here are a few:

1) Establish an independent body, insulated from politics like the Federal Reserve, that I’ll call the Financial Management Board, or FMB for short. This board would take over most of the functions of the Office of Management and Budget and the Congressional Budget Office (which largely duplicate each other’s work in any case). The FMB would forecast expected revenues and expenses and price out the cost of legislation, both taxation and spending bills. Those forecasts would be the ones Congress and the President would be required to use. Even more important, the FMB would determine how the federal books are kept, with a mandate to make them as transparent as possible, and would audit them. Want an example of just how dishonest the books of the federal government are? Remember those wonderful budget “surpluses” the government ran in the late 1990s? Well, if the government was taking in more money than it was spending (the definition of a surplus), why did the total national debt in those years go from $5.2 trillion to $5.8 trillion? Because the Treasury was borrowing money from Social Security and calling it income. Bankers and brokers realized well over a century ago that corporate management could not be trusted to keep honest books, so they forced them to accept generally accepted accounting principles and to have their books audited by independent accountants. Government management needs the same discipline. They are just as human as corporate management.

2) Give the President the line-item veto. The President is the only person in Washington, besides the constitutionally powerless Vice President, elected by the entire country. Therefore he alone has his political interests entirely in line with the national interest. Members of Congress on the other hand, while they have a general interest in budget restraint, have a very particular political interest in bringing home the federal bacon. Logrolling (you vote for my bridge and I’ll vote for your courthouse) ensures that there is plenty of bacon brought home. Giving the President the line-item veto would give him a powerful tool in the game of political horse-trading (I’ll go along with your bridge if you’re with me on this major money-saving reform).

3) Give the president the power to set overall spending. Congress, quite properly, has the power of the purse, and the Constitution says that “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law . . .” But there is no restraint on total spending, and in Senator Everett Dirksen’s famous phrase, “a billion here a billion there; the first thing you know you’re talking about real money.” By having the President control overall spending, subject to a Congressional override, with the power to enforce it by making cuts if Congress doesn’t, federal spending could quickly be brought under control.

These proposals would profoundly change the culture of Washington and greatly change the distribution of power. So I wouldn’t hold your breath waiting for their enactment.