1982, 1997, 2005

Those numbers in the title all represent years in which serious attempts were made to amend the US constitution so as to make a balanced federal budget a legal requirement*. That these attempts failed isn’t surprising. None the less it is inspiring that efforts continue to be made. In Australia there is no political will notable anywhere that would put in place such a constraint. We don’t even have such a constraint at the state level whilst in the USA it is very common at the state level.

Meanwhile a constitutional clause that caps per capita tax revenue at a fixed real dollar amount, unless revised by the citizens through a referendum, would put a handbreak on growth in tax financed government spending. This is what they call TABOR in Colorado where it has been in operation since 1992. To be effective I think TABOR needs some sort of legal remedy. If actual tax revenues do exceed the cap by a given proportion then taxpayers (citizens and corporations) should be able to claim a equivalent proportion off their tax liabilities for the year.

i) Mandatory balanced budgets – to stop out of control borrowing.

ii) TABOR – to stop out of control taxation

Sadly I think that without constitutional constraints such as these bigger government by autopilot is somewhat inevitable. With them in place I think liberal democracy could look forward to a very long life.

* One disappointing aspect in the proposed US reforms were the exemptions granted during times of war. Whilst this might on the face of it seem quite reasonably I suspect that in practice it would simply increase the government incentive for war.

4 thoughts on “1982, 1997, 2005

  1. I would like another amendment:

    iii) A requirement that Government action (spending or regulation) passes a CBA [and ideally that such action has a higher NPV than alternative private action].

    My views on tax reform:

    *A tax plan to rival Ken Henry:

    1. Freeze the GST

    2. Cut income tax to a flat 10%, payable above the dole rate and freeze it, treat company income and CGT as income.

    3. Freeze local council rates.

    4. Balanced budget amendments and abolish all other taxes.

    5. Make future changes possible such as the eventual funding purely from the GST – and even cutting it to 5% as growth permits (as per a taxpayer’s bill of rights [TABOR]). This is a decades long plan that relies on growth. This would require ending duplication and splitting services/outlays roughly equally across the three tiers.

    6. If we are unfortunate enough to be saddled with a carbon tax, cut income tax or the GST to an equal level of revenue.

    It would be absolutely worth it.

    Starve the beast. This isn’t a matter of left v right or even “paying for a decent society”. It is about holding the Government accountable for waste, standing up for the overtaxed public and getting a more efficient economy.

    When will ACOSS etc understand they are not looking out for their own interests? 600 mln AUD spent, and Rudd hasn’t built a single home for Aborigines in the housing package he promised.

    Get rid of the waste, it is a no loser policy. I roughly worked out before that we could do the split and end duplication with a 20% GST. The ending of duplication would pay for savings plus some cutting of general waste (easily cut). Increasing the GST, even if it abolished all other taxes, would be unpopular. The idea was to let it drop each year so that real per capita spending never increased (as per a TABOR).*

  2. Just a note. NZ has a Fiscal Responsibility Act, instituted and shepherded through Parliament by our then Minister of Finance, Ruth Richardson. 1993 I think.
    What is now common sense to most seemed to many then to be reckless, right wing and uncaring.

  3. The ACT party in New Zealand has argued for TABOR at the local and national level. If they ever succeed I will make a good case for moving to NZ. Or at least investing there.

  4. “* One disappointing aspect in the proposed US reforms were the exemptions granted during times of war. Whilst this might on the face of it seem quite reasonably I suspect that in practice it would simply increase the government incentive for war.”

    Exactly right. War means matching ends and means. Thats a time when you need to, more than any other time, find spending cuts, so that strategy is appropriate, and so your act is a well-oiled machine. The costs of war must be taken away from the soldier to the extent that we can do it, and the sacrifice of war placed on the laps of public servants in terms of cutting off their salaries.

    The last thing you want to do is come out of war in debt. Since former friends will now start pushing you around, and the government of the day will have a bias to inflation. Thats one way you can win war and lose the peace. Which is what Americans have become adept at.

    To win wars we must think crisis and anti-Leviathan. We must reverse the historical calculus. War must be what THINS DOWN the state.

    If you look at how pathetic Washington is, its partly to do with how big its gotten. And how many bludger jobs were created after 9/11 when what was needed was a fearful culling as everyone had manifestly failed.

    We want tight money, big surpluses, and Canberra a ghost town, once we go to war (we are at War and we don’t have this. Which is part of how ineffectual we are being). They have to move to Alice Springs if they are serious. Because being serious means killing regime leadership. And there is obviously going to be some blowback from that.

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