September 26, 2012
As originally published in the New Hampshire Union Leader
Budgets are a discipline we force upon politicians who have trouble controlling themselves. Left to themselves, politicians will promise you the moon without telling you about the new moon tax they have to impose to pay for it. On Earth, the discipline of a budget means spending causes taxes or cuts to other programs. Gravity doesn’t apply to federal politicians but the rest of us must follow the rules.
During political season, we are often treated to politicians trying to pretend the normal laws of budgets don’t apply. They can “restore funding” or “invest resources” without any admission that there are costs to their platitudes.
Budgets are quite simple in principle. The government collects a finite amount of money. Rather than authorizing the spending of that money on an ad hoc basis and suddenly running out when they get to something important, budget writers prepare a comprehensive list of programs and make sure they spend only what they have. In a balanced budget, as in your household budget, spending is limited by the resources available.
If the programs a politician wants to implement exceed the money available, he must choose among competing priorities or decide that the total spending package is so important that the government should take more money from us. In general, the citizenry at large is hostile to adding or increasing taxes so politicians must make do with the money available.
In that light, every program competes against every other program for dollars. If we chose to spend another $100 million here, we must cut it somewhere else. Advocates for a particular program will try to get us to discuss it in a vacuum – isn’t this a good idea? Wouldn’t you support something like this if we had the money for it?
But if we made a list of everything that sounds nice, we’d have spending requests that were three or four times greater than the money we have. At that point, adult decisions have to made (unless you’re in Washington of course).
As an example, I’ve written numerous times about not funding commuter rail in New Hampshire. I like trains and would love to ride a train to Boston but I know that the millions of dollars required for that project would come at the expense of other budget priorities. Pollsters ask people if they support a train in a vacuum (they ask in a vacuum, no one is suggesting we run trains inside of vacuums). The correct question is “if additional funding is available, would you rather it be spent to fund the developmental disabilities waiting list or spent on a commuter train to Boston?” You can predict the result which is why they don’t ask it that way.
During an election season politicians are unlikely to discuss tradeoffs. They just say “we can find the money for this worthy project.” More recently, some say “we should restore the cuts the Republican legislature made.” Yet, those cuts were made precisely because the money wasn’t there. The previous legislature had temporarily propped up spending despite declining tax revenues by using a one-time federal bailout and borrowing money to pay operating expenses.
The alternative to spending reductions was to raise taxes. During a recession. Think of taxes as a price on economic activity. A higher price would lead to less activity in that area.
During this election season some politicians will talk about restored funding. Will they offset that funding with cuts to other areas or do they intend to raise taxes? In almost every case, they intend to raise taxes – actually this month they intend to start a dialogue, have a discussion, consider our options, not rule anything in or out. Those euphemisms are easier to push past the voters. The actual tax hike comes post-election.
There is an exception to all this. At the state level you must be disciplined or raise taxes. Those are the only options. At the federal level a third option is open to you – borrowing. In Washington, taxes only pay for two-thirds of federal spending. The rest they borrow which saves them having to make decisions. Politicians in Washington aren’t adults and don’t have to be. They get to borrow the money and saddle our grandchildren with debt. Maybe we should change that.
Back here in the real world spending means taxes. Every program competes for the same dollars. Ask your candidate to treat you like an adult.