Politics & Policy

Want Low Taxes? Watch the Spending

South Carolina's Mark Sanford shows the way.

This year, as state legislatures convene, people should tune out the rhetoric of balanced budgets and instead look to the actual spending behavior of politicians in office — and to what their actions might mean for the exponential growth in government.

Any politician can say that he or she wants to balance the budget, and even make good on that promise. But in surplus years, as the economy has boomed, many state governors have “balanced the budget” by increasing spending to match any surplus revenues received, ignoring the need to “save for a rainy day.” Some governors even have tried to balance the budget by raising taxes on top of already rising revenues to support even greater spending.

A better approach is to manage spending carefully — in both lean and surplus years — with an eye towards refocusing government spending on core government functions, such as education and law enforcement, while keeping the overall burden of government as light as possible. As Thomas Jefferson declared, as a matter of principle, the state should not take bread from the mouth of labor. And a state certainly should not do so to pay for a pork-barrel project in one legislator’s district, rather than services and infrastructure that benefit all taxpayers.

Fortunately a few politicians understand the principle of limiting spending and working for smaller government. Take, for example, Mark Sanford, the newly re-inaugurated governor of South Carolina. In his first term, Sanford led a relentless charge against high taxes and excessive state spending. Faced with a $750 million shortfall, including an unconstitutional $155 million deficit, at the beginning of his first term, he moved aggressively to limit the growth of government and restore depleted trust funds — all with the goal of ensuring South Carolina’s competitiveness in a fast-changing global economy.

Sanford operates from economic first principles: As he said in his 2006 state-of-the-state address, before you begin new spending, “it makes sense to pay off money you borrowed.” To this end, the governor has mastered the art of the veto. (His website even has a separate “Veto Messages” area.) Notably, in May 2005 he issued a 36-page veto on the budget, which included 163 separate vetoes of either special interests or unnecessary spending.

Such attention to detail is commendable, but the critical point is that in order to keep taxes low, a governor has to keep spending low, too. In 2005, the South Carolina general assembly had wanted to put about 83 percent of $707 million in additional tax revenue toward new spending. Instead, Sanford showed that by eliminating special-interest spending, the state could prioritize core government functions. As the governor wrote, “Families make these sorts of decisions every day in South Carolina. . . . Not purchasing a good or service doesn’t mean the shopper views it as bad. They just view it as something they can’t purchase at the moment.”

Part of Sanford’s philosophy is to trust the people to make the right decisions about government spending. He has proposed putting to the voters a taxpayer-empowerment amendment that would limit government growth to the rate of population growth plus inflation. Unfortunately, the state’s general assembly has not yet approved this idea, revealing how a legislature’s impulse to spend on frivolous items — rather than core government services — may be stronger than a governor’s desire to limit spending.

If South Carolina were to spend all of its expected $804 million in new government revenue in 2007, the state government will have grown by an astounding 38 percent. However, the education, health, and law-enforcement needs of South Carolinians can be met without that level of excessive spending.

That’s why the people need to watch the spending habits of their representatives like hawks. It helps when state constitutions require balanced budgets, as is the case in South Carolina, but that’s not enough. In order to avoid damaging tax increases while refocusing government spending on needs rather than special-interest wants, political leaders must keep the pruning shears handy and maintain constant vigilance against government growth. Nervous politicians also need some evidence that increasing spending isn’t necessary to win elections. Evidence such as this: For four years, Mark Sanford took risks, practicing politics-not-as-usual. By reelecting him, South Carolina voters sent a strong message about fiscal restraint to the entire nation.

Prudent families — and governments — pay for dinner before thinking about dessert.

– Mallory Factor is the chairman of the Free Enterprise Fund. A version of this article previously ran in The State.

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