Maybe the next Congress will make good on the promise to end the era of big government.
"Thanks to a growing economy, a windfall of new tax revenue is bringing the federal budget into balance," report Scott Hodge and Geoffrey Freeman of the Heritage Foundation. "However," the two analysts lament, "rather than encouraging greater fiscal discipline and a debate over the role of the federal government in the 21st century, the likelihood of a balanced budget and potential surpluses has emboldened the White House and many in Congress to advocate greater spending and the creation of new programs."
Hodge and Freeman condemn such profligacy. "The current fiscal balance," they assert, "is not the result of a fundamental restructuring or downsizing of the federal government or of substantive entitlement reform. Indeed, most government agencies continue to grow and are plagued by systemic waste, fraud, mismanagement, and expensive long-term liabilities. The next step for Congress must be to reduce the size and scope of the federal government while dramatically reducing the tax burden on Americans."
Hodge and Freeman challenge the incoming Congress to reduce taxes, spending, and the size of government. They advocate abolition of "senseless budget rules that inhibit Congress' ability to cut taxes," the use of tax cuts "to create constituencies for spending cuts," the return of budget surpluses "back to families as tax cuts," and adoption of the budget rules "that work well for state governments." Hodge and Freeman also urge Congress to "take proactive steps to reduce the size, scope, and cost of the federal government by terminating dysfunctional programs, privatizing commercial enterprises, and transferring localized programs to state and local governments." They suggest "consolidating redundant programs and replacing them with simple block grants or vouchers" and recommend reducing federal liabilities by "using proceeds from the sale of government assets."
Daniel Mitchell, also of the Heritage Foundation, recommends overhauling our current tax code, which "severely penalizes productive behavior by imposing excessive tax rates on work, savings, investment, risk-taking, and entrepreneurship." He points out that "the average taxpayer in 1997 worked until May 9th to satisfy the revenue demands of federal, state, and local government. At no other point in history has 'Tax Freedom Day' occurred so late in the year." Mitchell condemns the "bias against savings and investment" in the current tax code. "If a taxpayer earns a dollar, he can choose (after paying tax on it) to consume it or invest it," he explains. "If he consumes the dollar, he will pay little, if any, additional federal tax. If he chooses to invest his earnings, he is penalized by the tax code."
Mitchell advocates "a single-rate, consumption-based tax, such as the flat tax. A flat tax would allow significantly stronger economic growth," he argues, "by replacing the current tax code with a simple low tax of 17 percent that would remove the bias against savings and investment." Mitchell predicts that the flat tax would also "restore integrity to a tax system that has become synonymous with special-interest corruption."
