Norquist's Pledge Forces Elected Officials to Limit Congress's Overspending

Hubbub over Norquist is only a distraction from the tax reform we really need

By Pete Sepp

, Executive Vice President of the National Taxpayers Union

November 29, 2012

About Pete Sepp:

Pete Sepp is executive vice president of the National Taxpayers Union.

Hanging the Taxpayer Protection Pledge around the personality of its architect might make for juicy headlines, but it also conveniently obscures a nagging reminder: As in previous budget impasses, taxpayers are now being asked to make futile sacrifices to cover Congress's wanton overspending. The pledge forces elected officials to 1) admit this fact, 2) find a better way to address deficits, or 3) pay a political price for failing to do either. No wonder some politicians are chafing under it.

Conventional "wisdom" in Washington claims that only a "balanced" approach can keep us from a fiscal crash, even though unbalanced expenditures will keep taking us to that point. According to the Congressional Budget Office's "extended baseline scenario" under which all current tax relief provisions would expire—including middle-class rate reductions and the Alternative Minimum Tax "patch"—federal revenues would reach 21.2 percent of our gross domestic product 10 years from now. Yet, spending would still beat that figure, at 22.4 percent, and that assumes cuts Congress has traditionally avoided, such as lower Medicare reimbursements to doctors, magically take place. The main drivers are entitlements such as Medicare, Medicaid, and Social Security. Over the next decade, spending as a share of our economic output on this budget category will jump by 21 percent, while "other spending" on functions like education and defense are supposed to fall by 37 percent (how many politicians will keep that "pledge"?).

[See a collection of political cartoons on the budget and deficit.]

Furthermore, embracing tax hikes wouldn't necessarily fatten federal coffers anyway. After Ronald Reagan signed the 1986 tax reform law that raised capital gains tax rates, revenues actually fell. After Bill Clinton signed a law cutting capital gains rates in 1997, collections soared. More bipartisan agreement on spending restraint—which we saw for at least a couple years in Clinton's term—helped to bring temporary budget balance, too.

There's also a better way to stabilize revenues: honest, comprehensive tax reform. Over the long term, such simplification could help to reduce the cost of paperwork burdens from the federal income tax system, estimated at $228.4 billion. Freeing up these resources for more productive pursuits can help grow the economy, in turn creating steadier taxable income and profits.

Politicians who are bent on boosting taxes rather than confronting out-of-control budgets always complain about "roadblocks" in their way—whether members of the other party, promises to voters, or that pesky old Constitution. Overburdened taxpayers have another name for these impediments: guardrails.