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Just keep the books

National | Five reforms: Integrity, transparency, plain English, frugality, and limited power. Concentrate on these things and the next Treasury secretary won't have time for mischief

Issue: "How shall we then govern?," Oct. 28, 2000

Liberal politicians with programs to sell are fond of saying that the nation is like a family. Of course it's not true. The family and the state have very different functions in society. The attempt to turn government into a parent/provider leads to a swollen public sector that interferes in society in ways it should not. That does not mean, however, that valuable lessons cannot be drawn from family life and applied to political life. In recent decades, ministers of the gospel have come to see the crucial role of thorough marriage preparation for young couples, particularly as it affects personal finance. Romance is great, but it can often blind young people to the realities of the financial burdens and responsibilities of marriage. For those reasons, ministers and priests now encourage couples to speak frankly to each other about their current financial status, their expectations, and their earning and spending goals. It has not always been so. The minister used to stick to traditional "moral concerns" like the importance of being a faithful spouse, of being an active member of the church, and serving each other with undying mutual love. But these days, with the availability of endless consumer credit and open-ended student loans, opportunities for financial promiscuity are everywhere. Quite often it is not the strictly "moral issues" that lead to marital strains and divorce but rather practical issues like mounting debt and lower-than-expected income streams. As ministers, then, we've learned to employ some moral principles of personal finance, which include the importance of being truthful, realistic, and reasonably frugal in household budget decisions. Just as the failure to take this course can lead to moral disasters, adhering to them helps build a sound financial foundation for a secure homelife. Keeping the financial books straight can also encourage the formation of strong personal bonds within a marriage. When I hear the way citizens talk about government these days, I'm reminded of young married couples who lack a proper and complete marriage preparation. People frequently speak of all the things that government does for them and all the wonders that government will do for them in the future. We vote according to an assessment of which candidate will do the most for us. As for the realities of government finance-especially the cold, hard one that the government has nothing to give us that it does not also take from us-most people just don't want to know. We speak confidently that the government should subsidize our houses, pay the bills for our children's education, provide for our retirement, bear the burden of our medical expenses, bail out our businesses, and perform a thousand other tasks that were once left to us as individuals and as members of our community associations. Indeed, politicians encourage this attitude in us. They ask: Wouldn't you like free prescription drugs? Wouldn't you like a subsidy or a guarantee of success in your line of work? Wouldn't you like free job training in case you are laid off? Politicians used to make grandiose promises about guaranteeing us freedom from want and fear; now, they tantalize us like credit-card companies: Vote for me and I'll keep interest rates low and the stock market soaring. This is especially true with the prospect of budget surpluses on the horizon. Washington has begun to think of itself as a veritable Toyland with goodies to hand out to one and all. You need only be a good citizen and all will come your way. But citizens are in for a rude awakening somewhere down the line. It's common for the government to speak of its spending as "investment," but real investment is self-financing because it feeds the productive engine of the market economy. Government spending doesn't work like that. No amount of fancy language or budgetary tricks can change the reality that all government spending is a form of wealth redistribution that gives to taxpayers only what it also takes from taxpayers. This is true even with social insurance programs like Social Security. The money put in by today's retirees was spent long ago by the political class. Who pays the retirement income of today's seniors? Young people do, just as their Social Security income will later be paid by their own children and grandchildren. This is intergenerational redistribution disguised as government benevolence. I don't dispute that the programs have been beneficial for many. But we are foolish only to consider the benefit and not the cost: For millions of Americans, the tax bite of this program is larger than any other single tax. But politicians, like loan sharks trying to get newlyweds hooked on credit, are loathe to explain the costs, or even the full truth about the workings of these programs. Their advertising tells you only the part you want to hear, but buries the bad news in the fine print. Citizens only discover the costs when it is too late to do much about it other than pay the high taxes (or, more deceptively, bear the inflation that erodes the dollar's earning power) to fund the program when it grows beyond all proportion. The lack of frank talk about the national budget over the years has seriously strained the citizens' relationship to the state. In fact, it can properly be described as a love-hate relationship: People love the benefits but hate the price they pay for the benefits. But somehow many people fail to make the connection between the two. They attempt to vote for tax cuts and higher spending at the very same time. There is no way out of this predicament but to raise strong moral concerns about the uses of the national budget and the corrupting influence government spending can have on us personally. In marriage counseling, ministers explain to couples that they need to remember several simple rules. They tell them to forget the idea that they can have it all. No one can keep up with the Joneses; the attempt will lead to bankruptcy. Financial sacrifice is necessary in order to achieve financial security. Living on credit is not a solid foundation for future financial growth. Above all, always be honest about your financial position and never deceive your spouse about your spending. So it is with the nation at large. We need honesty in our financial dealings. We must face the fact that government cannot do it all. Even if it could, Christians should not permit it to. Indeed, if there is one political principle that Christendom has embraced (at least in theory) for 2,000 years, it is this: Government must not subsume the role of the church, of the Christian community, of the family, or of God. Government has a role in society, but it is a limited role. Do we know the limits anymore? Are we willing to talk frankly about them? It is time we do so. And a new administration can help the process along. The U.S. Treasury can make several clear policy changes that would dramatically change the way we think about government finance. First, we need integrity in budgeting. There must be a stop to the endless creation of new, slick financial ways to hide the government's future spending liabilities. The government's books need to be examined the same way a household's books are examined. And let there be no more talk about endless surpluses and the evaporation of debt when in fact all these are projections and not the current reality. Second, we need transparency in bookkeeping. Off-budget and on-budget need to be integrated into one single item called "the budget." (Show me a husband and wife who keep their finances wholly independent from each other, and I'll show you a marriage headed for trouble.) This budget should include year-to-year taxing, spending, and the difference between the two. And when Congress objects to spending programs and zeroes out the budget, there should be no resorting to peculiar and previously unknown "funds" to keep the cash flowing. Third, we need plain English in budgeting. In the Clinton era, all sorts of budget terms have been deliberately mixed up. Tax breaks are called subsidies and subsidies are called tax rebates. Tax cuts are routinely called "spending the surplus," language reporters like to echo. All this nonsense must stop. It is only confusing the essential issue. Let's return to simplicity itself: Taxing means taking people's money and spending means signing government checks. It would also be nice if all budget proposals distinguished between the two. Fourth, we need frugality, even now. Just because the government has the money doesn't mean it has to spend it. Tax cuts are a marvelous way to deal with surpluses. They spur economic growth and meet the demands of justice by giving people back what belongs to them. Treasury should drop the assumption that government revenue and spending must always grow at the same pace as the private economy. Fifth, we need to stop the escalation of the power of the secretary of the treasury. He is not in charge of the world economy; the attempt to pretend otherwise only inflames the developing world and the heads of state in Europe. His job should be more like that of a bookkeeper. He has more than enough to do implementing the previous four suggestions. He does not need to crusade on behalf of the strength of the dollar or otherwise intervene in the affairs of other nations. We need not stop there. So long as we are seeking to make government finance conform more closely to everyday family finance, some bureaus within the Department of Treasury need attention. First and foremost, there's the Bureau of Alcohol, Tobacco, and Firearms. Its original mandate is no better than its present practice: It threatens and coerces the public into behaving according to the desires and priorities of the administration in power. In the Clinton years, that has meant an unprecedented expansion of agents who carry guns and are charged with ferreting out Americans who take their Second Amendment rights more seriously than the ATF thinks they should. If this is a job for government, enforcement should surely be devolved to the states. Centralized power has led to the perception of corruption at all levels. Alexander Hamilton, the first secretary of the treasury, was friendlier to consolidated government than his Jeffersonian rivals; but surely even he would be alarmed by the picture of ATF agents busting down doors and arresting firearms merchants on the merest suspicion of failure to comply with every jot and tittle of regulatory law. Intimidation rather than the rule of law seems to be the present focus. In recent years, the IRS has made great progress in treating cases of tax delinquency with negotiations and payment plans rather than jail terms and confiscations. This is a great step in the direction of humane government. But it is also important to remember that these changes in tax-collection practice came about after a decade or more of public pressure backed by congressional hearings. There is surely more to do in this area. And above all, the best means to achieve the broadest possible level of compliance with the tax code is to lighten the tax burden and simplify the tax code. Progress has also been made in the reduction of public debt in the 1990s. But if you look at the numbers you find that the main source of this reduction has been new revenue inflows to the treasury. And why did this occur? Tax increases may have played a role, but the real font of revenue has been the growing economy, exactly as the much-reviled supply-siders from the 1980s predicted. I can't recall the last time I read an article that gave men such as Jack Kemp and Art Laffer credit for being correct about this (while I've seen dozens that praise Clinton to the skies). Perhaps the new administration might call on these prophets of old to offer advice on how to reduce the debt to zero. There is also something that we, as members of families and as citizens, can do to reform the system. We can reject the idea that government spending is a source of happiness. Rather we should join with St. Paul and pray "for kings and all those in authority, that we may live peaceful and quiet lives in all godliness and holiness" (1 Timothy 2:1-2).

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