Can We Find The Path To ‘Minimum Government, Maximum Governance’?

David Cohen Former Deputy Assistant Sec. of the Interior
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“Every Sperm is Sacred,” an old parody song by the British comedy troupe Monty Python, poked good-natured fun at Catholic doctrine on birth control. The song’s title is, of course, a comic exaggeration of the church’s position. But substitute “government program” for “sperm,” and you’re left with a not-so-exaggerated characterization of how we govern ourselves. Public sector programs appear to be endowed by their creator — i.e. government — with an unalienable right to (perpetual) life.

On the other side of the world, voters have entrusted the world’s largest democracy to a leader with quite a different approach. Narendra Modi, India’s incoming prime minister, presided over an economic boom as chief minister (governor) of the state of Gujarat. With the motto “minimum government, maximum governance,” Modi stressed the need to get government out of the way so the private sector could create prosperity. He streamlined the bureaucracy of his state and instituted a culture of responsiveness and accountability (concepts perhaps too “alien” and “exotic” to translate in Washington). He also decentralized authority, devolving power to the villages. Although rooted in Indian culture and history, Modi’s reforms were compatible with some archetypal Western theories about government: that government is best which governs least; government is best when it is closest to the people.

In the U.S., we have long forgotten how to “govern least.” We labor under the tyranny of permanence, an almost-irrebuttable presumption that every single program or agency that has ever been created still is, and will always be, necessary. Each program, of course, has its own constituency that is greatly invested in its survival: those whose jobs or contracts depend on it, those who otherwise benefit from it and, usually, their lobbyists. In the political process, the strong interest of these constituents in perpetuating their program — regardless of whether the program is cost-effective — will almost always trump the distributed interest of taxpayers to cut spending generally.

As made clear by the VA scandal, the Obamacare debacle and other recent horror stories of government incompetence, our federal government has inverted the Modi model: maximum government, minimum governance. Taxpayers, like the millions forced to replace their health plans because of Obamacare, are compelled to pay for things they don’t need and can’t afford.

The federal government is already too big to manage effectively, and continues to grow out of control: It currently spends $3.5 trillion per year, and the president is trying to increase that to $3.9 trillion. It has a rapidly increasing debt of $17.5 trillion that exceeds GDP, and is on track to double over President Obama’s eight years in office. The publicly-held portion of its debt — the portion that burdens the private credit markets — has more than doubled as a percentage of GDP since 2007 to over 70 percent. It has unfunded liabilities on top of that which exceed, according to some estimates, $127 trillion. It fritters away over $220 billion per year to pay interest on its debt, about the same amount it spends on education and veterans programs combined — and its interest costs are projected to quadruple over the next decade. If we don’t act soon to rein in the size and scope of government, we will end up placing impossible burdens on taxpayers and the private sector. That, in turn, will reduce our economy’s capacity to generate opportunity and, ultimately, severely constrain government’s ability to help those who need it. The dollar’s primacy in the world financial system currently cushions us from the full impact of our profligacy; we will face catastrophic consequences if that ever changes.

In the private sector, market mechanisms impose cost discipline. The federal government, of course, is insulated from market discipline. It is therefore up to our lawmakers to impose the discipline necessary to temper the growth of government. And that means finding the courage to say “no” to countless powerful interest groups who, collectively, exert constant pressure on government to expand.

Not surprisingly, some of the best ideas to control the growth of government come from the states. In Texas, almost every state agency has an expiration date. The Texas Sunset Advisory Commission conducts a detailed performance review of agencies that are scheduled to expire, and can recommend that an agency be continued, merged, or terminated on schedule. Legislation is required to extend the life of an agency past its expiration date; such legislation typically continues the agency for 12 years, and can incorporate recommendations by the Commission to make the agency function more effectively. Since this process was instituted in 1977, it has resulted in the closure of at least 78 agencies and saved taxpayers $29 for each dollar spent on the performance reviews.

The federal government would benefit from a Texas-style procedure, where the presumption of impermanence replaces the presumption of permanence. The political climate in Washington, of course, is different from that in Texas. The effectiveness of a federal sunset review procedure could be compromised by a strong disinclination on the part of Congress to let programs die. That’s why a sunset review procedure should be backed by spending controls.

Since Congress can always undo what it does legislatively, spending controls should ideally be written into the Constitution. There have been various proposals to amend the constitution to require a balanced budget, except in cases of war or national emergency. Such an amendment would preferably make it difficult to raise taxes as well, perhaps by requiring a supermajority vote to raise taxes above a certain threshold. Rep. Justin Amash (R-MI) has proposed a “business cycle” balanced budget amendment that would generally limit outlays to the average revenue collected in the previous three years, adjusted for inflation and population growth. Amash’s idea should be palatable to Keynesians, because it allows for deficit spending during downturns; it would also generate surpluses in up years to pay down the debt. His proposal, like other balanced budget proposals, would be phased in over a period of several years. A similar approach is used in Switzerland, which amended its constitution to require balanced budgets over the course of a business cycle. This “Swiss debt brake” procedure, which has been praised by free market economists such as Daniel J. Mitchell, sets spending caps based on estimated tax receipts for the coming year.

It is quite a heavy lift, of course, to amend the Constitution. There are also a number of legislative proposals to control spending, including one from Sen. Bob Corker (R-TN) that would, over a 10-year period, phase us into an annual spending limit equal to 20.6 percent of GDP (the historical average). Rep. Kevin Brady (R-TX) has a comparable proposal that would, additionally, introduce a Texas-style sunset review procedure.

Under both Corker’s and Brady’s bills, failure by Congress to agree on annual targets would trigger a sequester that would chop almost every federal program. As the former head of a federal office, I have long favored a flexible version of the sequester: Establish deep spending cuts through caps at the departmental level, and then give the executive branch as much flexibility as is constitutionally permissible to find savings. Executive branch managers are in the best position to identify and squeeze out waste, but heretofore have had little incentive to do so. Congress, of course, would have to specifically legislate the most important effort in our battle to regain fiscal health: entitlement reform. Spending controls, if designed properly, would force us to reform entitlements before it’s too late.

It will be no easy task for America to regain its solid fiscal footing, just as it will be no easy task for Narendra Modi to achieve his vision of “minimum government, maximum governance” at the national level in India. It will be interesting to see who makes more progress in the months and years ahead.

David B. Cohen served in the administration of President George W. Bush as U.S. Representative to the Pacific Community, as Deputy Assistant Secretary of the Interior, and as a member of the President’s Advisory Commission on Asian Americans and Pacific Islanders. He is the author of Left-Hearted, Right-Minded: Why Conservative Policies Are The Best Way To Achieve Liberal Ideals.