'Tis the Season: Congress Gets Ready to Tax and Spend Again

Watch out for the reckless spending increases politicians will include in the upcoming omnibus bill.


It's that time of year again—alas, I don't mean when the world falls in love as in Karen Carpenter's rendition of a charming Christmas song. No, it's the countdown to the inevitable omnibus bill that Congress and President Obama will foist on an unsuspecting public before they recess for the holidays. To the uninitiated, omnibus is code for "political grab bag" and is the reward for our elected officials who could not get their jobs done according to the established budgetary process. House Republicans did their duty and passed a budget, but Senate Democrats have yet to do so (we're at about 900 days and counting, such is the quality of Sen. Harry Reid's leadership).

There are several "goodies" to be on the look out for, both on the spending and tax sides, that lawmakers will be maneuvering to get into this grab bag. Under normal circumstances these "goodies" would not pass political muster. Many of them carry significant price-tags and dramatically increase government's interference in our economy. If you were to name just two real losers, you need only consider a Postal Service bailout or the New Alternative Transportation to Give Americans Solutions (NAT GAS) Act, which would cost up to $5 billion, giving tax credits and direct subsidies for a substance that is already cheap and abundantly available.

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

The American public is right to be cynical about the motives of politicians. Talk is cheap. I believe in watching what political leaders actually do. Unfortunately, if past is prologue, we will see elected officials who claim to want to reduce spending voting for sizable increases. We will probably see spending provisions that look suspiciously like the earmarks members of both parties profess to abhor. We will also see politicians who claim to want real tax reform vote to layer on distortionary provisions directly at odds with that aim. Regardless of which permutation of tax reform you prefer, all of them share certain goals: simplify the code, broaden the base, remove penalties against savings and investment, and lower the rates. No member of Congress who claims to want tax reform should continue junking up the code with provisions that distort economic behavior and make the goal of real tax reform even more difficult to achieve. And no member of Congress who claims to want spending cuts, should vote against amendments that would, for example, reduce funding for rural development subsidies at the Department of Agriculture by $1 billion or any other amendments aimed at reducing spending for interest groups. It is about as genuine as the person who says they are trying to lose weight because they drink a Diet Coke with their Big Mac and super-size fries.

[Read the U.S. News debate on the Balanced Budget Amendment.] 

As the Republican presidential field continues its roller-coaster ride, one positive development has been the renewed focus on major tax reform. The American economy desperately needs the improved growth and job creation that would ensue, while the American people would have more faith in a system that was simple and transparent. It is a worthy goal that should not be side-tracked by politicians who hypocritically claim to support tax reform while cynically rewarding favored industries and distorting market decisions. We need to dramatically lower the trajectory of federal spending, as studies of fiscal policy in dozens of countries have proven. It is time to ignore rhetoric and focus on how fast spending is growing. The benchmark is that the budget gets balanced in 10 years if spending growth is capped so it grows only 2 percent per year. Our current path, which does not reflect this, is the road to financial ruin.

Political leaders should give the American people a real gift. This holiday season, they should walk their talk.

  • See a collection of political cartoons on the deficit super committee.
  • See an opinion slide show of 10 wasteful stimulus projects.
  • Read the U.S. News debate on the flat tax.