Tuesday, November 4, 2008


Ever wonder why the federal government always grows, never shrinks? Conservatives, libertarians and most Republicans have been railing for decades, promising to rein in Washington - but more new federal laws on more subjects continue to be enacted and almost none are ever repealed. Spending goes up, never down, and taxes grow apace.

The reason for this failure and government’s continued growth is simple. Political forces in the Democratic Party long ago managed to overcome the Founders’ “checks and balances” and, in recent decades, to turn them around backward. After enactment of the income tax in 1913, the original limitations were no longer sufficient to prevent government growth, but the checks and balances that exist today do make it nearly impossible to shrink the big government we already have.

Obstacles intended to restrain the enactment of federal laws, taxes and spending now prevent their repeal. Take, for example, President Ronald Reagan and his two terms in the White House. He did manage to lower confiscatorily high tax rates to some extent and caused many Americans to understand that big government does more harm than good. But by the time he took office, the Democrats had long ago already built the vast federal edifice. It was a fact. As a practical matter, he had no power to dismantle it.

For President Reagan to have repealed even one of the Democrats’ favorite spending or regulatory programs would have required a 60-vote Republican majority in the Senate and a dependable Republican majority in the House. He had neither - not even close. Democrats controlled the House by a wide majority throughout his presidency. In the Senate, where the Republicans had slim majorities from 1981 through 1987, they always fell well short of the 60-vote mark necessary to repeal any law or federal expenditure that the Democrats really wanted to keep.

All other Republican presidents in the modern era, from Dwight Eisenhower in the 1950s to George W. Bush today, have in varying degrees been similarly blocked. They have been able to talk about the efficiencies of more limited and smaller government and they have occasionally been able to slow its growth - but the fact is that none of them has ever had the requisite power to shrink government in a major way.

In contrast, the Democrats have frequently and for prolonged periods had the White House and overwhelming majorities in both the House and Senate. In the 1960s, Lyndon Johnson was in that all-powerful position. In the ‘70s, so was Jimmy Carter. They and their like-minded predecessors in the ‘30s and ‘40s did their jobs well. And we are still today suffering from their big-government legacies.

If the Obama-Pelosi-Reid Triumvirate succeeds in taking complete control of Washington as the polls predict, they will be able to do whatever they wish. Redistributive federal spending is likely to treble. Taxes on payroll and income likely will go up immediately. But because additional revenues from these kinds of taxes depend mostly on growing levels of economic output - and because the more heavily Mr. Obama taxes output, the less of it the economy will be able to produce - the revenues from high income and payroll taxes will almost certainly be insufficient to satisfy the Democrats’ enormous new demand for cash.

Mr. Obama will need at least some access to existing forms of private wealth - such as private savings in banks and other accounts, stock portfolios, home equity values, farms and small businesses. The most immediately vulnerable will be private wealth held in accounts over which the federal government already has some control. This includes tax-exempt retirement accounts (including 401(k) plans); all state and municipal retirement funds, such as the huge endowments for teachers in California and Texas; the pot of cash in the Federal Thrift Savings Plan; and the tax-favored endowments of all universities, charities and other nonprofits.

By simply retroactively reversing the tax treatment of private and public pensions, charities, schools, etc., Mr. Obama could immediately put his hands on roughly $2.5 trillion without paying any recompense whatsoever - and could “borrow” from these vulnerable sources another $12 trillion to $14 trillion in exchange for potentially worthless government IOUs. First, he takes your money; then he gives you an IOU that can only be repaid by increasing your taxes. Not a good deal!

If Mr. Obama and the resurgent left-wing of the Democratic Party can pull it off, all the foregoing radical changes plus many more may occur - and in all probability will be irreversible. America could become and remain a government-owned and government-operated socialist state.

Ernest S. Christian, a lawyer, was a deputy assistant secretary of the Treasury in the Ford administration. Gary A. Robbins, an economist, served at the Treasury Department in the Reagan administration.

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