In these days of chronic federal deficits, it may come as a surprise that Congress once ran chronic surpluses. In fact, the black ink became so regular and so massive that by 1857, President James Buchanan declared, "Our present financial condition is without parallel in history. No nation has ever before been so embarrassed by too large a surplus in its treasury."
Congress created the post of budget director in the early 1920s. Charles G. Dawes, a Chicago banker who became the first man to hold the job, berated Congress during his confirmation hearing for its reckless spending. He was confirmed nonetheless and then went on to supervise a cut in expenditures by one-third in a single year. As a result, he recorded a surplus equal to 22.4 percent of outlays.
Those were the days when red ink was a mark of mismanagement, a shameful aberration which required corrective measures both quick and decisive. Americans had a far better grasp then than they do now of these basic fiscal virtues: a) government has nothing to give anybody except what it first takes from somebody; and b) government that's big enough to give you everything you want is big enough to take away everything you've got.
Today's politician understands all too well that if you rob Peter to pay Paul, you can usually count on the support of Paul. One candidate for Congress in Michigan states in his literature that he wants to "reduce the deficit and bring our fair share of tax dollars back to the district." The problem here is that for one congressman to get more for his district, he almost always has to agree to vote for more for almost every other congressman's district.
Now the rush is on to do what the conventional wisdom in Washington describes as the "tough but responsible" thing--raise taxes. But how tough and how responsible is raising taxes when by any measure, tax revenues to the federal government have already been rising dramatically, by some $75 billion annually since 1982? Congress has spent all of the additional income each year, and then some. Uncle Sam's total take amounts to 19.8 percent of GNP today, compared to 19.4 percent ten years ago.
It seems to me that the genuinely tough and responsible stance to take is one which looks the American people right squarely in the collective eyeballs and says, "You want more from government than you're willing to pay for. To satisy that urge, Congress overspends, pure and simple."
The solution to this dilemma is most emphatically not down the higher taxes path. When Congress promised President Reagan in 1982 that it would give him $3 in spending cuts for every $1 in tax hikes, it promptly welched on the deal and spent three times what the tax hikes of that year brought in. Congress disposes of extra income the way a hungry kid in a candy store handles his allowance.
Moreover, the economy is teetering and not likely to absorb the shock of a tax hike well. Because higher taxes are a drag on production, jobs, incentives, savings, and new business formations, it's entirely possible that they may actually produce less revenue, not more.
The Congressional Budget Office has estimated that a one-percentage-point rise in unemployment would increase the deficit by $24 billion, and that a one-percentage-point fall in real GNP growth would boost the deficit by $6 billion. Keeping the expansion going must be a top priority for anybody who really wants to staunch the red ink, and that means avoiding the poison of higher taxes.
The solution is the same as it's ever been--control the spending side. One way to do that is to enact an overall budget freeze, so that the government can spend no more next year than it does this year, and the same amount for two or three years thereafter. Within those constraints, Congress would have to make the hard choices its members are paid and sent there to make. Revenue increases, just from current tax rates, and moderate economic growth, would bring the deficit to near zero before 1994.
Bringing the troops home from Europe and other "peace dividend" savings can produce a financial windfall which should be earmarked not for new spending, but for deficit reduction.
For significant savings to be realized, Congress must have the courage to tackle entitlement programs. A one-year elimination of the cost-of-living adjustment for non-means-tested programs like Social Security and veterans payments would save $9 billion in 1991 and $58.7 billion over five years, according to the CBO. Adopting just a small portion of the many sensible cost-saving proposals of the "Grace Commission"--ignored by Congress for years--would save billions more.
As unpopular as it may be, Congress should take an axe to farm welfare, middle class subsidies, aid to businesses and foreign assistance. It has barely begun to consider huge potential savings from privatization; it should consider it for everything from its five power marketing administrations to marginal federal lands to public housing.
A balanced budget can be achieved if Congress faces up to its responsibilities and if the American people face up to the reality of their demands upon government. Until that happens, though, hold on to both your wallet and your job. If the tax-raisers have their way, both will be in jeopardy.
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