President Bush has now signed into law his $350 billion investor/worker tax cut. This was an unexpectedly decisive victory for Bush and for pro-growth economic policy. But as with most gifts from Washington, this tax relief comes with a catch. The income, capital-gains, and dividend tax reductions expire in 2008. So we get a tax cut for six years and then … poof, it disappears and we go back to the pre-existing tax code. The same is true of the repeal of the death tax that was enacted in 2001. The death tax is eliminated in 2010, but then in 2011 it magically comes back to life again.
Congress calls this “sunsetting.” We now make tax changes in Washington that are only temporary. This, of course, insanely complicates the tax code and makes long-term tax planning a near impossibility. How can anyone plan an estate if no one knows whether or not there will be a death tax after 2011. A sound tax system is one that is stable and where the rules aren’t rewritten more frequently than NBA teams fire their head coaches. Figuring out the tax code is now like playing a game of Monopoly — the rules change every time you pass GO.
Instead of sunsetting tax cuts — if lawmakers are really serious about eliminating the budget deficit — Congress should sunset government-spending programs.
There are now several thousand agencies in Washington with annual budgets of more than $5 million. In the last three years we have sunset not a single one. Many programs date back to the Franklin D. Roosevelt era and have no useful function. We still have, for example, a wool and mohair subsidy that dates back to World War I. The purpose of the program was to subsidize wool for the making of military uniforms. Guess what? We haven’t used wool in uniforms in at least twenty years, but we still give these well-to-do goat herders millions of dollars every year in taxpayer dollars.
Congress scandalously and quietly voted to increase the national debt ceiling by another $1,000,000,000,000 (that’s $1 trillion) last week. Worse yet, deficit spending in 2003 may reach a new post-World War II high. If we were to sunset obsolete, ineffective, and counterproductive federal agencies, we could balance the budget in lightning speed.
Do we really need to spend hundreds of millions of dollars on a solar-energy research, when the past $1 billion we’ve spent hasn’t produced a single kilowatt of electricity? Do we really need to be spending $300 million a year on bilingual education, when all the research shows that foreign-language classes stunt the learning of English by immigrant children? Do we need to be providing free Viagra to Medicaid patients?
Wait, there’s more. Do we really need 15 different agencies to fund job-training programs? Should we be giving the Pentagon a $50 billion raise this year when the federal accounting office tells us the department cannot even account for hundreds of millions of dollars that disappeared? Why do we give Amtrak nearly $1 billion a year in taxpayer handouts, when its financial performance deteriorates every year and its share of the transportation market continually declines?
Here’s the budget reform that’s needed: All federal programs should be sunset every five years. We should then review the financial performance of the agencies that receive the $2.2 trillion that Uncle Sam doles out each year.
We could then take this a step further. Congressman Pat Toomey of Pennsylvania has suggested common-sense legislation that would not allow a spending increase for any federal agency that cannot pass a basic audit. It turns out that hundreds of agencies receiving billions of dollars cannot pass the kind of audit that every business must undergo each year. It turns out, we have a multitude of Enron-like problems right in the heart of Washington, D.C.
In 1995 the new Republican majority in Congress proposed the elimination of 200 programs that no longer serve a useful function. They ranged from the shark-research program at the Department of Commerce to the Legal Services Corp. We called these programs Washington’s “living dead.” The Cato Institute reports that nearly ten years later, you can count on two hands the number that have actually been terminated. Like the Orkin pest-control man, a sunset provision would allow us to actually kill these pesky programs dead.
“The closest thing to immortality on this earth,” Ronald Reagan once complained, “is a federal government program.” We should make federal agencies justify their dollars, just as my kids are forced to justify their allowance. If Congress pulls the life-support plug on unneeded agencies, we can put the federal government back in the black for good. And then we wouldn’t have to sunset those tax cuts at all.
— Stephen Moore is a senior fellow at the Cato Institute and president of the Club for Growth.