Cutting Politicians' Pay Over Deficits May Backfire

Yesterday at Cato@Liberty Marian Tupy blogged:

Having inherited an 8 percent budget deficit from the previous socialist government, the new conservative-liberal government of Slovakia has come up with a novel way of keeping budget deficits under control in the future. Starting in 2011, salaries of government ministers will rise and fall depending on the evolution of the fiscus. Thus, a budget deficit of 5 percent will translate to a 10 percent decrease in salaries, while an (unlikely) budget surplus of 5 percent will translate into a 10 percent rise in salaries, etc. It will be interesting to see if this new measure will truly result in a more responsible fiscal policy in the years to come.

Maybe, but it might backfire. Here's how:

Politicans who favor deficits--for whatever reason--may be able to claim the moral high ground by playing the martyr. The financial harm they do themselves by deficit-induced salary cuts could allow them signal their commitment to the public good.

Rather than making hard choices about whose political favors to reduce or eliminate, they could effectively be off the hook as long as the pay cuts are less important to them than maintaining and expanding their political power (especially rich, big government types). Deficits could get worse if this dynamic further weakens the remaining constraints on politicians to run deficits.

I could be wrong. It depends on the combination of formal institutions, informal rules of conduct, culture, etc, in Slovakia. Which I know nothing about. So we'll watch and learn.

Still, it wouldn't be near the top of my list of effective ways to constrain government budgets.

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.