Go Boldly Into the Budget Night : Orange County reflects a national will to cut taxes and spending across the board.

That the Orange County electorate has rejected the proposed increase in the county sales tax--even in the face of threatened reductions in county services--suggests two core perceptions on the part of the voters. The more obvious is the quite reasonable view that substantial efficiencies in county government remain available and ought to be exploited before taxpayer wallets are lightened yet again.

The more subtle message carries important implications for the current budget debate in Congress: If taxpayers are willing to accept reduced services in order to avoid a tax increase, they must believe that some government is not worth what it costs. This means that taxpayers would prefer reductions in both taxes and spending; and if that is true at the county level, it is true in spades in faraway Washington.

Therefore, it is substantial tax reduction that is the political key to an across-the-board attack on federal spending. That is the reality because most voting groups within the electorate benefit from specific special-interest programs but, with the exception of the elderly, lose from the total burden of the federal tax-and-spend machine as a whole.

Thus is tax reduction the friend, not the enemy, of spending discipline and a balanced budget. The conventional Beltway wisdom that the voters want their programs but would rather not pay for them is woefully misguided, based as it is on the typical “insider” view of ordinary Americans essentially as boobs. The true political reality is very different. Voters do not want their individual programs cut because they believe that the ensuing budget savings simply will be spent on pork benefiting someone else. Moreover, spending reduction intended to yield some general benefit for the economy as a whole is, from the viewpoint of a given voter or interest group, a classic collective good: Each group prefers to obtain a free ride on the sacrifices made by others.

The defeat of veteran House leaders last November bespoke an electorate in full recognition that the acquisition of federal spending goodies requires a logrolling process in which programs benefiting other groups also must be paid for, a bargain that has come to be seen as a net loss by a decided majority. This is consistent with the recent survey findings in which 52% of the respondents preferred fewer government services coupled with tax reduction.

It is reasonable to believe, then, that a package deal of sharp reductions in both taxes and spending would yield net benefits for most voters, thus improving the political viability of smaller government dramatically. The spending cuts must be across the board rather than piecemeal in order to prevent a breakdown of the package deal, and to ease the burden faced by politicians forced to explain why particular programs were not exempted.

This is why the view, seemingly common among some prominent Republicans, that tax reduction is the enemy of a balanced budget is incorrect, even apart from any ensuing beneficial effects upon economic growth and the tax base. It is, accordingly, the House $350-billion tax cut--and not the House-Senate $245-billion compromise now under discussion--that proponents of limited government should support. Yes, the child tax credit provides no marginal growth incentives. Yes, some of the business tax provisions are inefficient economically. But such quibbles miss the forest for the trees: The appropriate goal is the large-scale rollback of federal power, an end achievable politically only if the middle class is presented with a package deal combining substantial tax and spending reduction.

In short, bolder is better. This historic opportunity to shrink the federal Leviathan has emerged because of a citizenry now quite conscious of paying more and more for less and less. But no change will be meaningful over the long term unless the scope of federal power is reduced dramatically. Such real change will stand in stark contrast to the hopelessness of a mere tinkering effort around the margins of the welfare state.