Laffer is confident that smart politics — a platform that includes tax cuts, preferably in the form of a flat tax – can produce the kinds of economic conditions that will make budget-balancing possible in the long run. But he is hesitant to address the issue of spending. He points to the case of California’s Proposition 13, the 1978 tax revolt that arguably launched anti-tax conservatism as a national political force. Proposition 13 was all tax cuts. Five years before, Reagan had pushed for Proposition 1, a mix of tax cuts and spending cuts. “We cleaned their clocks with Proposition 13,” Laffer brags, “but Milton Friedman and Reagan got killed on Proposition 1.” But Proposition 13 can hardly be considered a real success in anything other than political terms: It did not produce fiscal discipline, and it did not provide a long-term solution to California’s budget problems. Legislators are legislators, and California is California: Proposition 13 was the shot heard round the conservative world, but the Golden State took only a few decades to degenerate into its presently bleak fiscal condition.
It’s really hard to create political incentives that will keep legislators from overspending. Conservatives should know this, because we’ve tried it before. The Gramm-Rudman-Hollings Act of 1985, which enacted automatic federal spending cuts if the deficit exceeded predefined targets, went through hell, high water, and the federal courts before its provisions were allowed to kick in. But when they did kick in, they worked. They worked with a hard and furious vengeance: The deficit was reduced from $221 billion in 1986 to $153 billion in 1989, from 5.2 percent of GDP to 2.8 percent of GDP. In fact, Gramm-Rudman worked so well that Congress, facing real spending constraints for the first time, killed the act, replacing it with the toothless Budget Enforcement Act of 1990.
This we know: Tax cuts don’t get us out of the spending pickle, and growth isn’t going to make the debt irrelevant. Legislative mandates and gimmicks like spending caps and the like will not constrain the spendthrift habits of appropriators — because, if they do, they will be repealed, just like Gramm-Rudman was. You can’t starve the beast if the Chinese and the bond markets keep lending him bon-bons by the ton. And the prospect of enacting a balanced-budget amendment to the Constitution is a castle in the sky.
So, what should conservatives do? One, abjure magical thinking about tax cuts. Two, develop a rhetoric in which “spending” and “taxes” are synonyms, so a federal budget with $1 trillion in new spending means $1 trillion in new taxes — levies on Americans today or on our children tomorrow, with interest. Three, get a load of those tea-party yokels, with their funny hats and dysgraphic signage, and keep this in mind: They are opposed to the Democrats, but what they are really looking for is an alternative to the establishment Republicans, whom they distrust, with good reason, when it comes to the bottom-line question of balancing the budget and getting our fiscal affairs in good order. And then, finally, decide which angry mob you want to face: today’s voters or tomorrow’s bondholders.
– Kevin D. Williamson is deputy managing editor of National Review. in whose May 3, 2010, issue this article first appeared.