Archive for the ‘spending’ Category

The Attack on Colorado’s TABOR and the Threat to Other States

Posted on: January 9th, 2013 by admin No Comments

IP-1-2013 (January 2013)
Author: Robert G. Natelson and Zakary Kessler

PDF of full Issue Paper

A lawsuit challenging the constitutionality of Colorado’s Taxpayer’s Bill of Rights (TABOR) has dire implications that extend far beyond the boundaries of Colorado. The theory of the lawsuit can be used to void well-founded safeguards in the constitutions of almost all other states.

In Independence Issue Paper 12-2012, Professor Rob Natelson, II’s Senior Fellow in Constitutional Jurisprudence, debunked the lawsuit’s claim that TABOR violates the requirement that each state have a “republican form of government.” In this Issue Paper, Professor Natelson and Institute intern Zak Kessler demonstrate the practical implications of the lawsuit.

If the plaintiffs win, the result will be legal and practical chaos, not just in Colorado but across the country. This is because the theory of the lawsuit is that any fiscal restraints on a state legislature render that legislature less than “fully effective” and therefore “unrepublican.” Special interests can employ this theory to destroy well-founded and long-standing safeguards against legislative fiscal abuse. Furthermore, they can use the same theory to attack the voter initiative and referendum process, and other constitutional limits on the power of state politicians.

Why college costs so much: government financial “aid” is more harm than “aid”

Posted on: April 13th, 2012 by Brian T. Schwartz No Comments

This originally appeared in the Boulder Daily Camera on April 9, 2012.

Are tax-funded student loans and grants financial “aid” or financial harm?  ”Harm,” political scientist Gary Wolfram would say. Tax-funded financial aid “results in increased tuition, leading to political pressure to further increase aid. This in turn leads to higher tuitions,” he writes.

Basic economics predicts that subsidizing the purchase of a product increases demand for it, and hence increases the price.  For example, in four-year public schools, a one dollar increase in student loans was associated with a 93-cent increase in average tuition students paid, writes Dr. Andrew Gillen in his study “Financial Aid in Theory and Practice.”

Dr. Gillen shows that since 1986, the federal government’s financial “aid” has nearly tripled. During this time per-student fees and tuition have almost doubled, Gillen shows. Student debt “has generally outpaced inflation” and family incomes, reports US News and World Report.

Educational opportunity hasn’t faired well, either.  In 1972, students in the top income quartile were six times more likely to earning a bachelor’s degree by age 24 than those in the bottom quartile. Today, upper income students are eight times more likely, notes economist Richard Vedder, author of Going Broke by Degree.

Politicians win points for being “pro education.” But politically-driven financial “aid” for college is truly harmful.  Low graduation rates show that “aid” distorts people’s career choices by encouraging them to attend college, even though learning valuable skills in an unsubsidized apprenticeship might be wiser. They drop out after realizing they’ve wasted time learning unmarketable skills. Then they must pay off debt, if they can find a job in today’s “stimulated” economy.

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See also:
Higher Education Subsidies” at
The Center for College Affordability and Productivity

Is a Balanced Budget Amendment “Delusional?”

Posted on: March 15th, 2012 by admin No Comments

By Barry Poulson, PhD, Representative Spencer Swalm and Representative Ed Casso

During the past year both the House and Senate failed to pass a resolution calling for a Balanced Budget Amendment to the Constitution. Resolutions proposing a Balanced Budget Amendment have failed numerous times in Congress over the past half century; in 1995 the Amendment passed the House and came within one vote of passage in the Senate.

Critics argue that this approach to fiscal discipline is ‘delusional’ because even if a Balanced Budget Amendment were incorporated in the Constitution politicians would find ways to evade these fiscal rules. But, these critics ignore the fact that 49 states have incorporated balanced budget provisions in their constitutions, and that with few exceptions these fiscal rules have effectively constrained the growth in state spending, enabling state governments to pursue a sustainable fiscal policy.

Congress, the President, and the American people understand that in the long run we must constrain the growth in federal spending in order to achieve a sustainable fiscal policy, and that this is a necessary condition to restore economic growth and prosperity.

It is because politicians have an incentive to increase spending at an unsustainable rate that balanced budget rules should be incorporated in the U.S. Constitution as well as state Constitutions.

This is a classic case of Arrow’s impossibility theorem. Assume that outcome A is current fiscal policies with unconstrained growth in deficits and debt; outcome B is a Democrat proposal to balance the budget by cutting defense spending; and outcome C is a Republican proposal to balance the budget by cutting non-defense spending. Democrats prefer outcome B to A, but prefer A to C. Republicans prefer outcome C to A, but A to B. Majority voting rules will result in voting cycles with no stable outcome, so the government is likely to muddle along increasing deficits and debt until the country experiences a fiscal crisis, such as that currently experienced in Europe.

The Founding Fathers may not have understood Arrow’s Impossibility Theorem, but they certainly understood the potential for unconstrained growth in federal spending to bankrupt the country. Thomas Jefferson stated that if there is one thing that he would have incorporated in the Constitution it is a Balanced Budget Amendment. “It is incumbent on every generation to pay its own debts as it goes. A principle which if acted on would save one half of the wars of the world.” Jefferson also anticipated how this flaw in the Constitution could lead to the current fiscal crises. “Unless the mass retains sufficient control over those entrusted with the powers of their government, those will be perverted to their own oppression, and to the wealth and power in the individuals and their families selected for their trust”.

The Founding Fathers provided a solution to this fiscal crisis by incorporating Article V in the Constitutions, giving the states as well as Congress the power to propose amendments to the Constitution. As James Madison states in Federalist #43, The Constitution “equally enables the general and the state governments to originate the amendment of errors, as they may be pointed out by the experience on one side, or on the other”.

It is clear that unconstrained growth in federal spending is precisely the failure in the federal government for which Article V was designed. Submitting budget decisions to the constraints imposed by a Balanced Budget Amendment would require that politicians forego their power of the purse. But the ability to slice and dice the federal budget, spending money to the benefit of special interests who can get them elected and keep them in office is the life blood of politics. In the absence of an effective balanced budget constraint this rent seeking game is biased toward continual deficit spending and accumulation of debt.

It is time to fulfill the Founding Fathers vision of a prudent federal government pursuing sustainable fiscal policies that will ensure our economic growth and prosperity. We can no longer wait for Congress to enact a Balanced Budget Amendment. The states can enact a Balanced Budget Amendment through an amendment convention under Article V of the Constitution. Federal fiscal policies could be constrained by the same fiscal rules that have proven effective in our state governments. To argue that this is ‘delusional’ is to ignore our constitutional history and more than two centuries of experience with balanced budget rules incorporated in state Constitutions.

Originally published in the Denver Business Journal, March 9-15, 2012

The Changing Role of Government, 1850 to 2011

Posted on: August 27th, 2010 by jlongo

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A good friend of the Fiscal Policy Center and Free People, Free Markets alumnus Tom Ryan has a wonderfully informative organization and website called Reclaiming Moral Government. Tom has created a slide show that displays the changing role of government from 1850 to present day. The viewer gets to see governments expansion into our lives through a beautifully color coordinated time lapse. It is truly well done. Tom was also kind enough to sit down with Fiscal Policy Center director Penn Pfiffner for an podcast. They discuss Tom’s new Reclaiming Moral Government venture and what Tom hopes to achieve through it. Please take a few minutes and see for yourself how government has managed to stick its nose into every aspect of our lives over the last 150 years.