JONATHAN CHAIT MARCH 3, 2010
Congressmen Mike Pence and Jeb Hensarling co-author a Wall Street Journal op-ed today proposing a new Constitutional amendment to limit federal spending to 20% of the economy, on the grounds that spending is bad. Apostate Republican Bruce Bartlett, who agrees that spending is bad, dismantles the proposal. Let me pick out three of Bartlett's objections:
5. An even bigger problem is that both the administration and Congress must necessarily develop the budget based on forecasts of GDP, which can sometimes be tragically wrong. For example, the budget for fiscal year 2009, which ended last Sept. 30, was first put forward by President Bush in January 2008. At that time, OMB estimated GDP for 2009 would be $15,215 billion. It turned out to be $14,259 billion—almost $1 trillion lower than expected. CBO did a little better; its January 2008 estimate for GDP in 2009 was $14,997 billion. Assuming that Congress used CBO’s forecast, it would have appropriated almost $150 billion more than permitted under the Hensarling-Pence proposal simply because of forecast error.
6. It would be one thing to impose a constitutional limit on spending if Congress had to vote on all of it every year; that is, if the entire budget consisted of discretionary programs. In fact, discretionary spending, which includes national defense, constituted only 35 percent of federal outlays last year, down from 61 percent in 1970. Since two thirds of the budget now goes either to interest on the debt or entitlement programs, how can this be controlled on a yearly basis? If too many people turn 66 and claim Social Security benefits, is Congress going to say they can’t have them if it would push spending above 20 percent of GDP? Of course not; the idea is ridiculous.
7. Tax expenditures are a huge loophole through which spending can be driven. For example, instead of spending $1 billion to buy some new equipment for the Army, the government could give the contractor a transferable, refundable tax credit worth $1 billion. Even if the contractor had no tax liability, it could simply sell the credit to some business that had at least a $1 billion tax liability. There would be no increase in spending as conventionally measured and taxes would simply be $1 billion lower.
Bartlett has ten such objections, each of which is sufficient to destroy the rationale for this idea. He concludes:
[T]his is a laughably bad proposal that deserves not one second of serious consideration. I’m embarrassed that I wasted so much time on it writing this post.
But of course, these aren't random cranks, they're members of Congress. What's more, Pence is considered something of a brainiac among Republicans. He's "one of the most sensible and intelligent spokesmen for conservative principles" (Washington Times); "smart" and a "wunderkind" (syndicated columnist Ruben Navarrette); "one of the more thoughtful and principled conservatives in Congress" (The Indianapolis Star), and so on.
I'm sorry if this comes off as condescending, but the quality of thought about public policy in the Republican Party right now is extremely low.