Debt and Deficits: Only the Tip of the Angry Iceberg

Barely had I published my last entry, when the Washington Post came out with a story about how many Democrats are adding fiscal austerity pledges to their campaign platform. I'm unimpressed.

On one hand, it's good that politicians of both parties have finally come to understand that Americans are fed up with deficits and debt. On the other, Democrats in general and many Republicans are missing the bigger picture: the American people want a reevaluation of the proper role of government and how that role should be distributed among the levels of government.

It's not just about the money; it's about being accountability. And if private enterprise cannot successfully undertake some collective action and government can do better, it should be the most local government that can address it, which also happens to be the level most accountable to the people. Suggesting that a congressman from Ohio can be held accountable for education quality in Florida, or a senator from New York for road congestion in California, is simply preposterous.

It's also about being left alone. The decennial census is supposed to count inhabitants for the purpose of apportioning members of the House of Representatives, nothing more. Yet it has morphed into a vast treasure trove for social science researchers. It sounds benign, but besides the privacy issues, the conclusions of that research provide justification for any number of wasteful and often counterproductive interventions.

Americans want more than cheap talk about the federal budget. They want their national political representatives to fundamentally reconsider the role of the federal government, eliminating, privatizing, or transferring to the states those activities that are not within its proper scope.

Constitutional Reform Needed Soon

It's been almost four months since I last blogged, courtesy of a rather heavy reading list for the final lap of grad school.

Twenty books and many discussions later, my grasp of constitutional economics has never been better. In a nutshell, constitutional economics has to do with how the basic rules of governance lead to different political and economic outcomes. The basic challenge is to escape anarchy or despotism by establishing the protective (military, police, courts) and productive (basic infrastructure, environmental protection, monetary policy) functions while constraining the ability of political actors to use the power of the state to redistribute. As it turns out, no advanced country seems to have figured out how to constrain redistribution very well.

In thinking about these issues, I've come to a few tentative conclusions. Politics as usual hasn't been very successful at limiting government. It looks like we need to think about constitutional reforms, such as
- Term limits (5 terms House, 2 terms Senate)
- Spending limits (inflation + population growth)
- Balanced budget requirements (spending = revenue two years before)
- Prohibition on new debt issue
- Two-year budgeting (budget odd years, oversight even years)
- Zero-base budgeting (all programs reconsidered each time)
- Periodic automatic program sunsets (without congressional reapproval, they go away)
- Putting all implicit debts (unfunded Social Security, Medicare, Medicaid, and pension liabilities) on the official annual budget

All of these are aimed at limiting the discretion of politicians. They're our employees, after all, so why do we let them get away with acting like our masters? Government doesn't give us meaning, it's just an instrument to accomplish those necessary things that cannot by provided by voluntary action.

Forcing government to live within its means would stop the intergenerational theft that has run rampant for the last eighty years and force politicians to make choices about priorities. It would also make it easier to say 'no' to the special interests.

How these reforms could be implemented is unclear. But unless Greece's situation looks like fun, we better figure it out soon.