4. DYNAMIC SCORING OF TAX LAW CHANGES

The 1986 capital gains tax rate increase has raised roughly $100 billion of less revenue than the Joint Tax Committee estimated when the law was enacted. Capital gains realizations are less than half the level expected. Why these gigantic forecasting errors? Congress still uses static analysis to score tax rate changes-a scoring technique that assumes little change in behavior to tax changes and almost no overall economic impact of new tax laws. The assumptions have been shown time and again to be wrong. We know the procedures are wrong. But we still use them. This has negative policy consequences. The capital gains tax cut in the Contract with America will almost certainly raise revenues for the Government-and the cap gains cut may raise substantial new revenues. The rich will pay more taxes with the rate cut. But the Joint Tax Committee refuses to score these dynamic effects. Representative David Dreier has introduced legislation calling for a zero capital gains tax-something the Cato Institute has long endorsed. But the static revenue estimators say this will reduce revenues by $150 billion over 5 years. Dynamic estimates indicate that a zero capital gains tax will so energize our economy that total tax revenues may actually increase if the capital gains tax is eliminated. But as long as we are slaves to static scoring, Mr. Dreier's much-needed legislation will never be approved.

Dynamic scoring will yield more accurate tax revenue estimates, and thus encourage better policy.

5. LINE-ITEM VETO AUTHORITY FOR THE PRESIDENT

This provision is obvious. The President should have the power to cut out the waste that Congress won't. A recent Cato Institute survey of current and former Governors finds that more than 80 percent believe the President should be given this authority. One of most negative consequences of the 1974 Budget Act was to strip the President of his legitimate impoundment powers a power that had been exercised by every President from Thomas Jefferson to Richard Nixon. Line-item veto would be a partial restoration of the Presidency's legitimate powers over the purse strings.

6. AN END TO BASELINE BUDGETING

When the school lunch program is going to increase by 4.5 percent per year, that is a budget increase, not a budget cut. Baseline budgeting is a fraud. Lee Iaccoca once stated that if business used baseline budgeting the way Congress does, they'd throw us in jail.

It's time to end the false and misleading advertizing in the budget. Congress should be required to use this year's actual spending total as the baseline for the next year's budget. If we spend more than the current year, we are increasing the budget, if we spend less, we are cutting it.

7. A STATUTE OF LIMITATION ON ALL SPENDING PROGRAMS

It has been said that the closest thing to immortality on this Earth is a Federal Government program. Congress doesn't know how to end programs-even years and years after their mission has been accomplished. Hopefully, this Congress will prove this statement wrong! A 5-year sunset provision should apply to every spending program in the budget entitlements and discretionary programs. This would require the true reinvention of programs by forcing the reexamination of every program including entitlements, every 5 years.

8. DEBT BUY DOWN PROVISION

This is Representative Bob Walker's idea of empowering taxpayers to dedicate up to 10 percent of their income tax payments to retirement of the national debt. Politicians earmark spending all the time. Taxpayers should have that same right.

The budget stamps solution

Most of the above ideas are standard-though long overdue budget reforms. I would also like to suggest one other less conventional budget process change. In fact, this is much more radical than anything tried to date to conquer the budget deficit. I borrow the concept from former Reagan administration economist John Rutledge.

If the balanced budget amendment remains stalled, why not control the cash flow directly? Under the Rutledge plan, the Government would issue a special blue currency called budget stamps, that would be issued to all recipients of Federal spending-much in the way that food stamps are issued to the poor. The recipients would

redeem these blue dollars for greenbacks at the local bank or post office. Here's the catch: If the Federal Government balanced the budget, a budget stamp would be worth $1. But if Congress spent twice as much as it collected in taxes, a budget stamp would be redeemable for just 50 cents.

This year the Federal Government would issue $1.6 trillion of budget stamps. Those budget stamps would have a total worth of $1.4 trillion-the amount of money collected in taxes. Hence, each blue budget buck would be worth roughly 87 cents. Each day the Federal Treasury would report to banks and post offices how much budget stamps are worth, depending on how many stamps had been issued and how much revenue had been collected. In this way, total cash outlays would exactly match tax revenue inflow.

Budget stamps would force the constituents of Federal largesse to compete against each other at the budget table. Each dollar allocated to farmers would be $1 less for welfare recipients, Social Security beneficiaries, defense contractors, bilingual education teachers, subsidized artists, and so forth.

Deficits would be impossible, since the Government under the new budget process would be incapable of spending more than it took in. And finally, because Congress' salaries and staff's would be paid in budget stamps, newt Gingrich, Dick Gephardt, Bob Dole and every member of this committee would have a strong financial self-interest in limiting spending.

I am convinced that Rutledge is on to something. The budget stamp idea is one that the recipients of government largesse will hate, but taxpayers will love. Fortunately, there are still a few more of the latter than the former.

[The chapter from the book, "Government: America's Number 1 Growth Industry," referred to by Mr. Moore follows:]

The

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2020: A Budget
Odyssey

"The natural progress of things is for
liberty to yield and government to gain ground."
-Thomas Jefferson

Imagine the headlines for January 24, 2020:

PRESIDENT PROPOSES $6 TRILLION BUDGET,
RECORD TAX HIKE

INTEREST RATES SURGE, DOW PLUMMETS

Washington, D.C.President released his fiscal year 2021 budget blueprint today, a plan which calls for the first $6 trillion budget in U.S. history and a $600 billion tax hike-the largest tax increase in American history. At least $400 billion of these funds

2020: A Budget Odyssey

2020: A Budget Odyssey