Watch taxes, not
just spending
By MALLORY FACTOR Guest columnist
As states inaugurate their governors and legislatures, taxes and
spending are again key issues across the country. This year, when
state legislatures convene, the people should tune out the rhetoric
of balanced budgets and look instead to the actual spending behavior
of politicians in office — and what their actions might mean for the
exponential growth in government.
To put it bluntly, any politician can say that he or she wants to
balance the budget, and even make good on that promise. In surplus
years as the economy has boomed, many state governors have “balanced
the budget” by increasing spending to match any surplus revenues
received, ignoring the need to save for a rainy day. Some governors
have even tried to balance the budget by raising taxes on top of
already-rising revenues to support even greater spending.
A better approach is to manage spending carefully in both lean
and surplus years, with an eye toward refocusing government spending
on core government functions, such as education and law enforcement,
while keeping the overall burden of government as light as possible.
As Thomas Jefferson declared as a matter of principle, the state
should not take bread from the mouth of labor. A state should
certainly not do so to pay for a pork-barrel project in one
legislator’s district rather than for services and infrastructure
that benefit all taxpayers.
Fortunately, a few politicians understand the principle of
limiting spending and working for smaller government. Take, for
example, newly reinaugurated Gov. Mark Sanford of South Carolina. In
his first term, Gov. Sanford led a relentless charge against high
taxes and excessive state spending. Faced with a $750 million
shortfall at the beginning of his first term, including an
unconstitutional $155 million deficit, he moved aggressively to
limit the growth of government and restore depleted trust funds, all
with the goal of ensuring South Carolina’s competitiveness in a
fast-changing global economy.
Sanford operates from economic first principles: As he said in
his 2006 State of the State address, before you begin new spending,
“it makes sense to pay off money you borrowed.”
The governor is a master of the forceful and articulate veto
message. (His Web site even has a separate “Veto Messages” area.)
Perhaps his most notable moment, however, came in May 2005, when he
issued a 36-page veto on the budget — 163 separate vetoes of special
interest or unnecessary spending. All this attention to detail shows
the critical point: To keep taxes low, a governor has to keep
spending down, too.
Of $707 million in additional tax revenue, the 2005 General
Assembly wanted to spend almost 83 percent on new spending. Instead,
Sanford’s plan showed that by eliminating special interest spending,
the state could prioritize core government functions. As Sanford
wrote: “Families make these sorts of decisions every day in South
Carolina.... Not purchasing a good or service doesn’t mean the
shopper views it as bad. They just view it as something they can’t
purchase at the moment.”
Sanford’s philosophy is also to trust the people to make the
right decisions about government spending. He has proposed putting
to the voters an amendment to limit government growth to the rate of
population growth plus inflation. Unfortunately, the state’s General
Assembly has not yet approved this idea. But it is a much more
prudent course than simply spending money without regard to the
future.
As the story of the amendment shows, a legislature’s impulse to
spend on frivolous items rather than core government services may be
even stronger than a governor’s desire to limit spending. If South
Carolina were to spend all of its expected $804 million in new
government revenues in 2007, then government will have grown by an
astounding 38 percent. But the education, health care and law
enforcement needs of South Carolina’s people can be met without that
level of excessive spending.
And that’s why keeping watch over spending is so important. It
helps to have a constitutional requirement to balance the budget, as
South Carolina does, but that is not enough. To avoid damaging tax
increases and to refocus government spending on needs rather than
special-interest wants, political leaders need to keep the pruning
shears handy and maintain constant vigilance against government
growth. Nervous politicians also need some evidence that increasing
spending isn’t necessary to win elections.
For four years, Gov. Sanford has taken risks, practicing politics
not-as-usual. By re-electing him, South Carolina voters sent a
strong message about fiscal restraint to the entire nation. Congress
would do well to match Gov. Sanford’s commitment against needless
government spending. Prudent families — and governments — pay for
dinner before thinking about dessert.
Mr. Factor, of Charleston, is the chairman of the Free Enterprise
Fund. |