Had Enough Gimmickry? Demand Fiscal Truth

You are missing some Flash content that should appear here! Perhaps your browser cannot display it, or maybe it did not initialize correctly.

Friday, May 26, 2006
House and Senate negotiators have come up with a striking new dodge for misleading American taxpayers. The tax reconciliation bill they agreed to recently has gotten much coverage for its extension of tax cuts on capital gains and dividends. Putting aside the merits of the bill, the problem is that this measure would cost the U.S. Treasury tens of billions of dollars in later years, which is against Senate rules. In particular, a substantial tax cut for some households — allowing them to convert regular IRAs to Roth IRAs — will raise revenue in the short run, but then incur substantial losses in later years, especially after 2015. 

The dodge is that senators are relying on an official budget analysis that doesn't extend past 2015, which allows them to claim that the measure will not deepen the deficit and therefore doesn't violate Senate rules. Brilliant! If it's not official, then it must not be a problem. 

We would chuckle at such tax and budget shenanigans on Capitol Hill but for one thing: They've become so habitual that they are now a threat to the long-term economic health of the United States and to your economic future, as well. 

With massive deficits, exploding debts to foreign governments and investors, and great uncertainty about the future of entitlement programs such as Social Security and Medicare, Americans need honesty, candor and straightforward budgeting from our political leaders. Instead, we get one ingenious gimmick after another. 

Let's take some examples. We are engaged in a long-term war in Iraq, and it is terribly expensive, something on the order of $280 billion so far. Rather than face our obligations head-on, however, the administration and lawmakers have opted to fund the war piecemeal, using "emergency" supplemental spending measures long after the war passed from an emergency to a yearly fact of life. That keeps it off the official budgetary balance sheet, while also reducing transparency and shielding it from amendments. 

Then there's the tax-cut example I started with. In truth, it is just one in a series of maneuvers by which congressional leaders have given tax breaks to selected taxpayers. They hide the cost of the tax cuts by making them temporary, and then extend them on the argument that tax increases must be avoided. 

Lawmakers prepared to argue that tax cuts are for the good of the nation should be prepared to present honest, straightforward projections about the costs of their proposals. 

Instead, Congress has become immensely creative when it comes to fiscal recklessness. It uses giant omnibus bills to hide the details of what it's spending money on and to avoid votes on them; it relies on "earmarks" outside the normal appropriations process to let lawmakers fund pet projects at home without scrutiny by their colleagues; it uses forecasts that underestimate future spending and overestimate future revenues, which is how it predicted wrongly, for example, that the tax cuts and spending increases of recent years would not jeopardize the large budget surpluses of the 1990s; it adopts accounting methods that would not be allowed in the business world to underestimate the true size of the deficit; it keeps tough tax-raising provisions on the books to make the projected deficit look smaller, but then regularly grants taxpayers relief from those provisions; and it omits from budget documents crucial information that would allow onlookers and analysts to gauge the impact of budget policy. 

Make no mistake about it, there is a cost to all this fiscal cleverness. America's population is aging, yet we are making no moves to get our fiscal house in order before the demands on the treasury outstrip anything we've known before now. Our spiraling federal deficit soaks up private dollars that might otherwise go to capital investment and productivity growth, both of which are vital if we're to afford the future we want for ourselves and avoid getting deeper in hock to the rest of the world. 

As the Concord Coalition put it recently, "Growing commitments made by one generation to the next cannot be honored on empty pocketbooks. A stagnant long-term economy cannot support retirement payments, medical care, and all the other benefits and services we would like. And it cannot support economic opportunity for today's youth to live as well as their parents' generation." Fiscal recklessness today, in other words, puts our — your — economic health at risk tomorrow. 

So wouldn't you say that it's time for Congress to treat Americans as adults? There is plenty of talk in Washington about changing the budgeting process, and some of it is warranted, but you should not let politicians escape responsibility for fiscal irresponsibility by talking about rules changes or the line-item veto. Politicians love to talk about procedural solutions because it enables them to dodge responsibility for the tough substantive choices. As Congress has shown, rules can be maneuvered around, and some of the smartest people in Washington spend their days coming up with new ways to do so. 

Instead, it's time to change the atmosphere that allows such game-playing to fester. We need political leaders who are budgetary straight-shooters, who will insist these budget gimmicks must go, and who are willing to level with voters about the impact of their policies, use accounting methods that accurately reflect what they're doing, and be honest about the hard fiscal choices that face us. 

(Lee Hamilton is Director of the Center on Congress at Indiana University. He was a member of the U.S. House of Representatives for 34 years.)