Live from the Nuke Free Zone

(Before I get in to my article today, I want to remind our readers to keep an eye out for the Zone’s traditional coverage of the State of the Union address January 31st. The Zone tends to post a bit later than other blogs, doing some background research and presenting some analysis of the speech’s content.)

So I had this thought about the budget. As our readers know, the U.S. is currently racking up enormous deficits, passing debt on to future generations to be paid with interest, increasing the drain on our economy. This is in large part due to politically-motivated tax cuts passed in recent years by a Congress and Administration who profess an allegiance small government but can’t shake an addiction to power and profligacy. This is possible since in the U.S. budget process taxation is voted on separately from spending measures; the former can be slashed willy-nilly, and then completely ignored when spending bills come up, to be packed with pet programs and pay-to-play projects of corporate welfare. The divorce of the two phases of the budget provides an opportunity for the kind of willful blindness that allows taxes to be framed as government theft from the private sector, and spending to take on a kids-at-Christmas wish list flavor that regards the budget as an evergreen money tree.

An improvement to the situation would be one that presented taxes as a societally-agreed payment for services to be rendered; that made deficit spending a conscious decision rather than an accumulation of small projects; that turned the tax debate into a question of paying one’s fair share. So I propose reformulating the budget process in the following fashion:

In the first phase of the budgeting process, instead of passing a tax bill that sets absolute rates, the Congress passes a bill that orders a given profile of payments from taxpayers: that is, such and such a percentage of the Government’s income for the year is to come from income taxation on wages people in this salary bracket, this percentage of income for the year from income tax on this salary bracket, this percentage from capital gains of these types, this percentage from tariffs on these items, this much from park fees, etc. The income-generating agencies in question are ordered as a part of this phase to project the valuation of the bases to be taxed.

No absolute level of income is set yet. Instead, Congress now turns to spending plans, passing this and that appropriations bills. The taxing agencies will be ordered to set a tax rate, based on their estimated valuations of their income base, that will generate revenue precisely equal to the total amount required for the programs Congress thereafter appropriates. Congress’ understanding in voting for programs, then, is that funding will be available for a program they vote into existence; the question before the Congress shall be, is this program worth the taxes that will be levied to fund it?

Consider the effect of the debates required for this budget process. In the first phase, the debate entirely turns on the question of what the fair share of each citizen, each income-earner, should be in paying for the services the government renders. It assumes as a matter of course that taxes are payments to be made for services, of which each citizen partakes at a given level and for which he thus incurs a reasonable level of indebtedness. In the second phase, it becomes extremely difficult to run a deficit; one must deliberately and consciously amend the tax bill to order that agencies collect a tax total of a given amount less than the programs to be authorized, should one desire to do so. (On the other hand, it’s much easier to run a surplus. One simply orders a program called “run a surplus,” and assigns the desired surplus level. Taxes will be set to accommodate the ‘program.’) One could also later pass emergency spending bills for a given year, which will not be covered by the tax levels set earlier in the year; the tax bill for the next year can then as a matter of course be required to cover the year’s programs plus payment of the debt accumulated. Still, emergency spending bills are a conscious choice, one that can be mitigated in the spending bills by establishing a margin of spending authority for situations various authorities declare to be emergencies — let’s face it, when was the last year we didn’t have unforeseen expenditures hit us? We may not be able to predict the actual expenditures, but it doesn’t take a genius to see that something is likely to happen. If not, dump unspent funds into debt service or the Social Security system or the like.

Such a budget system would have built-in pressures to avoid running deficits; would be based philosophically on the principles of paying a fair share for services rendered; would resist the characterization of taxation as theft. I think it would improve substantially on our current budget process. Now, the U.S. budget process is a multi-year, complex institution on which I am by no means an expert; I heartily invite comment and critique from all sides, especially people who know the system better than I do.