Pur Autre Vie

I'm not wrong, I'm just an asshole

Tuesday, January 19, 2010

What Is To Be Done

So it looks as though it's bad news out of Massachusetts. I think Democrats are going to have a tough time in the next few years for macroeconomic reasons, and that's just kind of shitty, especially since the Democrats are the party of responsible economic policy.

But taking a step back, I actually think a few substantively minor changes could improve politics a lot. Here's one idea I've been mulling over. The state legislature would set taxes at (x+y)%, where x is determined by statute and y is determined by a bureaucracy (but bound within some range). So the tax can be as progressive or regressive as you like, but the absolute level is determined by unelected officials. Those unelected officials would be given a simple mandate: balance the budget.

This would achieve two things. First, no elected politician would ever have to raise taxes (except in extreme circumstances). Fiscal responsibility would be baked in, and it would be fairly transparent.

Now, it might seem that this favors Democrats, in that it would be essentially impossible to campaign on lower taxes (the legislature could lower x, but this would just increase y by the same amount absent spending cuts). But actually I think this would just force the public to acknowledge the simple fact that cutting taxes without cutting spending defers or shifts taxes rather than truly cutting them. A GOP candidate could do just fine if he could actually point to spending cuts that would in turn allow a lower y.

The net effect should be a more responsible legislature and a more honest public debate over the appropriate level of taxes and expenditures.

You can extend the idea to the federal government, except that I would hire an economically sophisticated bureaucracy and empower it to run deficits under specified conditions (unemployment above a certain level, interest rates below a certain level, etc.).

30 Comments:

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Don't states with balanced-budget rules require tax cuts to be "paid for"?

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Blogger James said...

Maybe, I'll look into it. But right now California and New York are raiding local government budgets to plug their own budget gaps. This appears to be irresponsible and short-sighted, but basically they are desperate for cash. If they could just let taxes rise without having to vote for it, I think we might see a different outcome.

Incidentally, my idea would be pro-cyclical at the state level, so you would need the federal government to apply counter-cyclical policy at the same time or you could exacerbate recessions. However, I don't think my idea is more pro-cyclical than the status quo, so I don't see it as a big problem.

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