Changing the Guard Won’t Help Taxpayers : What if the biggest spenders were to find their constituents taxed proportionately more?

The Capitol Hill newspaper Roll Call reported in a recent issue that as a result of redistricting, retirement, senatorial ambitions and the probable defeat of at least a sprinkling of incumbents, there may be as many as 100 new faces when the 103rd Congress convenes next January. “Already, it’s certain that at least 12 freshmen will represent California,” the paper added.

One’s first reaction is delight. Congress has not functioned well in recent years, with public expenditures having gone almost completely out of control. So it’s good that perhaps 20% of the House will not be back next year. But after a moment’s reflection, one sees that nothing much will change. The problem is systemic, as the left used to say. To use the language of economists, the new crop of incumbents will face the same incentives as their predecessors, and they will respond to them in the same way.

Take the federal budget--a perilously dull subject, but bear with me. When Jimmy Carter became President, the overall budget was about $400 billion. Today, the budget deficit is $400 billion. At Ronald Reagan’s inauguration, total spending was about $600 billion. By the time he left Washington, it was, oh, $1.1 trillion. The latest budget number to pop up in the headlines is $1.5 trillion.

Every year, the same bogus drama is re-enacted: scare stories about cutbacks, calls for reductions in the rate of growth, mumbo jumbo about revised estimates, and then, when the numbers for the next fiscal year come out, federal spending has increased by $100 billion once more. Anyone who thinks 100 newcomers will change all that is an optimist.

Look at the problem from the point of view of a newly elected congressman, and we may suppose that he’s an idealist determined to be fiscally responsible. He will demonstrate a a little courage and vote no on spending bills.

Of course, he is only one of 435 members entitled to “withdraw” from the common pool. Soon he realizes that in declining to participate in the voting majorities needed to withdraw funds, he merely leaves more for the others. It’s the worst possible outcome from his point of view. Spending doesn’t decline, but his own constituents are shortchanged. In the general log-rolling needed to form voting majorities, sweeteners are added in the form of special pork-barrel projects for individual districts. And that is where he (and his constituents) will lose out. Voters in his district will soon learn that electing a fiscal conservative is an exercise in altruism.

Imagine that you and 434 others are issued a bank card with the same number that can be used to access an account.You would be advised to use your card soon and often, because the money in the account will soon be gone. (In the real-life Congress, of course, members can “overdraw”--run up deficits--to their hearts’ content.)

For years, these perverse incentives were held in check by autocratic “Southern chairmen” (usually portrayed as villains in the press) who used their seniority to restrain the tendency of common-pool budgeting to run out of control. These constraints were swept away during the Watergate era, and the key reform was ironically called the Budget Impoundment and Control Act. The budget has been out of control ever since.

There’s a simple reform that would immediately bring federal spending back under control, and I offer it here. What is lacking in the present system is any ratio, or proportion, between the individual congressman’s spending and the extent to which voters in his district are taxed. Federal taxes are the same in all districts.

This could easily be changed by adding up all the outlays that a congressman votes for in the course of a year and assessing taxpayers in his district accordingly. The constituents of a fiscally prudent congressman who voted no on most bills would be taxed at a lower rate the following year. But big spenders would saddle their constituents with higher tax bills. If such a proposal were enacted, spending would no doubt drop rapidly. It won’t happen, of course, because it is the lack of accountability in the present system that incumbents cherish.

Most voters don’t really know what is going on (the subject is so complicated), but they vote for their own congressman, often because they think he’s a nice guy. Since the problem of runaway deficit spending is not caused by venality, changing the guard will make no difference.

The problem is institutional. And to the extent that liberals believe that a high level of government spending is a moral good in itself (and most of them do), the status quo will be very difficult to change. The votes will not be available to make the needed institutional change.