by Mitch Kokai
Senior Political Analyst, John Locke Foundation
Global economist David Malpass devotes his latest Forbes magazine column to a split he identifies among Republicans regarding fiscal policy.
THE GOP presidential candidates are almost all fiscally conservative, but two different strands are evident. For some, fiscal conservatism emphasizes reducing the national debt and balancing the budget–reasonable goals in a world in which governments should live within their means. For others the emphasis is on smaller government and slower growth in federal spending. Their issue isn’t so much whether the government has the means for more spending but whether it has the right. It’s a Tenth Amendment principle, that most powers are reserved for the states and the people. Even if a program pays for itself and seems useful, the federal government isn’t supposed to control so much or pick so many winners and losers.
The divide is clearest on programs that “pay for themselves.” The Export-Import (Exim) Bank is acceptable to some fiscal conservatives because it seems beneficial and doesn’t cost much in budgetary terms. It makes loans and pays for most of its costs through interest income. The businesses that support it say it creates jobs. The other viewpoint, however, is that the Exim Bank should be shuttered because it makes the government bigger, isn’t necessary and violates the goal of limited federal government.
Of course, many Republicans want both goals: a government that balances its budget and stays small. Without clear legal boundaries, however, that’s hard to achieve. A government with a balanced budget almost always finds ways to use its success to double its spending, regulations and power. For the first group a federal government that spends and taxes at 30% of GDP might be fiscally conservative, whereas for the second group such a government is too big and, therefore, couldn’t be considered fiscally conservative. …
… Once governments expand they seldom shrink on their own. That was a key reason for the 10th Amendment, which is largely unenforced. Balanced budget laws won’t stop federal expansionism, because the most onerous programs and regulations often have a minimal effect on the fiscal deficit in their early years and tax increases are easier than spending cuts. The government has unlimited power to tax income and claim the budget will balance.
Fiscal conservatives have to sort this out or else be overrun by the progressive view that a program that creates government jobs and doesn’t cost too much is justified. It will take years of upheaval to shift from that view back to the constitutional requirement that federal power must be limited.