I know Americans have become so very attracted to reality TV and other pastimes that don’t stress strenuous intellectual activity — not the case here at allenbwest.com of course. We want to present thoughtful insights and perspectives in order to generate discussion. So this isn’t going to be some REALLY edgy missive, but it is an important one for the future of our Constitutional Republic.
There’s lots of talk about tax system reform. Currently we have a progressive tax system started in 1913 where individual income is taxed — and sadly, a progressive tax system is one of the planks offered by Karl Marx and Friedrich Engels in the “Communist Manifesto.” Now, some of you want to go right to a consumption based tax system — Fair Tax — because you want immediate abolishment of the IRS. I support a Flat Tax system, bifurcated, as a means by which we get our economy moving – with lower rates, elimination of capital gains, dividends, and death taxes. As well, I support a flat corporate tax.
However, we’ve had this discussion here previously that tax reform can’t be done in a vacuum — the real issue is reform of government spending. And that means moving away from a baseline budgeting system where the federal government increases spending every fiscal year — and a cut to spending is just a cut to the rate of the increase. I’m am happy to report that my former colleague, Congressman Dennis Ross (R-Fla), has stepped up to the plate — once again — to present a policy solution which I firmly support: zero based budgeting.
As reported by the Washington Times, “Kraft Foods is the latest in a long line of acquisitions by a private equity firm whose budget-cutting initiatives are so aggressive that employees complain they’re asked to justify the cost of a photocopy. Now some politicians and 2016 GOP potential presidential contenders are imaging a world where the U.S. Federal Government is asked to do the same.”
“The streamlining tactic, known as zero-based budgeting, requires each agency or business unit to justify their budget requests from scratch for all existing and newly requested programs. It’s something the federal government hasn’t attempted since Democratic President Jimmy Carter advocated for it in the 1970s; it relies instead on past budgets as a baseline of money that’s guaranteed, and then requests additional sums year-over-year.”“We have to justify our existence every day in the private sector — change to attitudes, trends. You have to adapt. Government doesn’t adapt. Instead it just incrementally adds on,” said Rep. Dennis Ross, who introduced last week — for the third time — his Zero Based Budget Act in the House of Representatives in the hope that the public sector can take a lesson from private enterprise’s playbook.”
“We should be painfully honest with the American people, because it’s their money,” said Mr. Ross, Florida Republican and a member of the House Committee on Financial Services. “When we do the budget process, we want to have some justification for every appropriation that is sought — a legal basis for it, an amount that is less than last year’s and a summary to express the outcome of it,” he said.”You see, there are twelve appropriations bills that must be passed each year, but the issue is that there are no priorities on spending. There is not a single person in Washington D.C. who can tell you what the number one spending priority is for the federal government.
Every dollar in Washington D.C. is not equal and every agency in the federal government should have to justify its spending…not just take it for granted that they’re going to get the previous year along with a certain percent increase. The sad reality is that too many in D.C. don’t realize this isn’t their money — they are being entrusted as faithful stewards of each American taxpayer dollar.
We are wasting spending because no one is checking the books and balancing the budget — unlike what is a definitive must in the private sector in order to stay in business. As well, stringent budgeting practices promote organizational effectiveness and efficiency — and we need that in Washington D.C.
The thought behind zero-based budgeting is that it shifts the burden of proof to each agency head, congressional member or manager to give justification for why they should be spending any money at all.
It requires them to analyze all activities and rank them in order of their costs and benefits. But there are doubts the public sector has enough discipline to make zero-based budgeting successful.
The Times says, “It just doesn’t work with Congress, because they all believe in the spending. If you’re on the Agriculture Committee, you believe in farm spending, [and if you’re on the] Transportation Committee [you believe in] transportation,” said Chris Edwards, the director of tax policy studies at the Cato Institute, a libertarian think tank. “There’s no cost-benefit trade-off for members in Congress — they just fight for much more every year.”
Therein lies the problem: no matter what happens with tax reform, if there’s no budget system reform, guess what will happen? The new tax reforms will still be structured in a way that the federal government can acquire more of your resources — and lest you forget, regulations imposed by the administration bureaucratic state are hidden taxation, especially on our small businesses. There is a ravenous appetite for spending, and until there is a systemic alteration it will continue.
Now, there are those who distrust the Article V Convention of States that would be able to bring about constitutional amendments from the states. Just so you know — a little civics here — it takes 34 states to bring forth an amendment to the Congress, but with 38 states’ legislatures you can revive the system of federalism and have a constitutional amendment. I think one of the measures that should be brought before our state legislatures is a zero-based budget for the federal government.
And there are already states which operate under that system — “In 2000, during Jeb Bush’s tenure as governor, Florida was one of the first states to enact an eight-year cycle of agency reviews to help it better evaluate budgetary requests. In Oklahoma, where lawmakers passed legislation requiring a four-year cycle of zero-based legislative reviews in 2003, but the process became so laborious, lawmakers didn’t have time to consider the budget, so instead they revised the law to get out of the zero-based process, the report said.”
“There are state governments interested in the notion of justifying the cost and benefits of every dollar spent. Idaho and New Hampshire’s governors have deployed zero-based budgeting with success, and in recent years 17 states have used zero-based budgeting in some form, and several more have made serious efforts to do so, according to NCSL.”
And to just illuminate you, our readers, on the U.S. federal budget, there are two sides; discretionary (subdivided in defense and non-defense) and mandatory. The reality is more than half of the federal budget gets automatically renewed and increased (the mandatory side), as Social Security and other entitlements need to be paid out by law.
Only new legislation passed by Congress (the discretionary side) and signed by the president can alter this part of the budget — no matter what its efficiency or worth. Ladies and gents, if we don’t get control of our budgeting system, here is the fact, the mandatory spending side will continue to grow to a point where it will subsume the entire revenues generated — unless government decides to increase taxation to attempt to maintain pace with excessive spending. We are looking at an existence for our future generations of perpetual debt and deficits. There is no balanced budget amendment for the federal government, because it’s not mandated to operate within fiscal restraints.
I know, this may not have been the most exciting thing to read — but it is the vital one. So as we head into a presidential election cycle, ascertain who are the candidates who understand tax reform must be accompanied by regulatory, monetary, and budgetary reforms. Question them on explaining the mandatory and discretionary spending sides of the federal budget and how they would create an opportunity economy and reduce public sector growth.
After that, then you can ask them, what makes you believe you’re ready to be commander-in-chief? No more “hope and change” please.