We Need to Move Beyond Earmarks

BOTTOM LINE UP FRONT: We need to win the battles over definitions, principles and policy when it comes to fiscal matters.

President Barack Obama has signed the $410 billion omnibus spending bill, and has broken yet another promise that he made during the campaign. Apparently, there was some debate in the Oval Office over what to do with the bill:

"White House aides said they debated whether the president should sign an omnibus spending bill that includes more than 8,500 pet projects worth $7.7 billion.

"White House counselor David Axelrod suggested a veto would send a strong signal that Mr. Obama's Washington really would represent change. But the president decided it wasn't worth adding a fight with his own party onto a plate that is already overly filled."

We can also surmise that Obama was too embarrassed to sign the bill in public. Check out these tweets from ABC News' Jake Tapper:

jaketapper: "Why are you not signing this bill in public?" the president was asked after he talked about earmark reforms he'd like to see. no answer.

jaketapper: president obama signed the omnibus spending bill...no photographs allowed.

I didn't think too much more about it until Patrick Ruffini, @thingsbreak and I had this short Twitter conversation:

PatrickRuffini: GOP should call for a total ban on earmarks in light of the economy and the deficit. Every day we don't do so we seal our irrelevance #tcot

alaskan: @PatrickRuffini Problem is that there's wasteful spending that aren't earmarks. Need to find a way to describe appropriate public goods.

thingsbreak: @PatrickRuffini But renouncing rather than reforming is political suicide. Earmarks are not intrinsically evil but abused. Agree/disagree?

PatrickRuffini: @alaskan @thingsbreak Earmarks are the most visible and easiest to fix symbol of how Republicans have lost their way

I agree with Patrick that earmarks are the most visible symbol. But that's exactly the problem. I don't agree that it's enough for Republicans to fix "symbols" of how we've lost our way. I don't agree that we need to focus on symbols. Yes, we need to fix the abuse of the earmark process by reforming it. But the fact is that not all earmarks can be construed as wasteful spending and not all wasteful spending are in earmarks.

At the Heritage Foundation's Conservative Bloggers Briefing, I mentioned this to Congressman Tom Price (R-GA), chairman of the House Republican Study Committee, and asked him how we can move away from discussing earmarks and move towards discussing wasteful spending. Price went on to talk about the growing deficit and debt, and said that we have to communicate these large numbers to the American people. I don't think this is quite enough.

It's easy to come up with rhetoric denouncing "the evils of earmarks," but what we should be focusing on substantively is wasteful spending. Republicans should take three concrete steps to revive conservatism in sound fiscal policy: (1) defining public goods and wasteful spending, (2) reformulate principles that voters can connect with, and (3) promoting new fiscal processes and policies that can achieve less spending, more transparency and better prioritization.

(For details on these steps, read below the fold.)

STEP 1: Public Goods and Wasteful Spending

A public good is defined by economists as a good that is non-rival and non-excludable. What does this mean? This means that one person can consume the good without reducing the availability of the good for others to consume, and no one can be completely excluded from consuming the good. It is often argued that when the market fails to create incentives for private individuals or groups to create these goods, that the government should get involved.

So, how can we translate this into plain English? Listen to Diane Lim Rogers, Chief Economist at the Concord Coalition (and former staff economist to the Council of Economic Advisers under the Clinton Administration), who joined Robert Carroll of the Tax Foundation (former Deputy Assistant Secretary for Tax Analysis under the Bush administration), in one of the Tax Foundation's Tax Policy Podcasts:

"I think the government should be involved where the private sector cannot be involved. And what I mean by that is that ideally the public sector steps in where there is no mechanism in the private sector, no incentives in the private sector, to step in."

But Rogers, who is self-identified as left-of-center, immediately provides her view of when government should be involved:

"In the short term, right now, the private sector is not really in the mood to consume or to buy things. We have limited credit access in the private sector but we have pretty unlimited credit, for the moment, in the public sector. So I think in the short term, when it comes to stimulus, the government is the only one available to spend, to buy goods and services.

"Over the longer term, there are certain things that government can do in terms of providing essential public goods and services, things that have more social value than private value. There are no private incentives to provide things that receive no price, no return for. So things that are more purely public goods in nature, obviously government has to provide those things: a strong defense, minimum standards of living for people, environmental protections, health care that has social benefits beyond private benefits. These are things that government has to be involved in."

Over the long term, I agree with Rogers on a few items (like defense and proper environmental regulations) and possibly disagree on the magnitide of a few items (like health care and minimum standards of living.) The stark difference between her point of view and my point of view comes in the short term where she takes the basic Keynesian stance on government-sourced economic stimulus. The definition of public goods should not be dynamic, so government gets to pick and choose when it gets involved in market cycles. The definition should be static and based on the long term.

So how should Republicans communicate this? We have to get away from the rhetorical extreme that says government shouldn't get involved in providing the public goods out there. Republican candidates have to start communicating with their constituents which goods are appropriate and not appropriate for government to produce.

But it's not enough to come up with the basic list: defense, education, infrastructure, etc. We have to battle those who believe we should provide every public good we can. We only have a limited amount of revenue. We need to prioritize our public goods.

But even within the priority public goods, there's wasteful spending. Example: John McCain has taken on wasteful procurement in the Pentagon. So how do we determine what wasteful spending is? Again, the economists' definition of wasteful spending would be an item where marginal cost is greater than marginal benefit. How do we translate this into plain English? This takes me to ...

STEP 2: Reformulating Fiscal Principles of Old

So after we define appropriate public goods and prioritize those goods, it's important to set up new principles of sound spending policy. What could those be?

• The Solution Principle: Every challenge facing the American people does not require a federal office and federal funding.
• The Priorities Principle: Every family and every business has to balance their checkbooks, their revenues with their expenses. Through good times and bad times, families and businesses have to sacrifice what they might want and prioritize their spending. The government should operate like any prudent family or business does, and prioritize.
• The Investment Principle: The American people are "forced to invest" their income into government. Each taxpayer is, therefore, a shareholder in government. Because taxpayers have invested their money into government, taxpayers deserve the best return on their money. This means the "portfolio of investments" (otherwise known as government projects and agencies) must be reviewed carefully and objectively in order for the government to fulfill their due diligence.

Simplifying complicated spending processes into these three principles can help Republicans connect with voters. So here's the hard part ...

STEP 3: Be innovative on sound spending policies.

Here are a few suggestions:

• Follow the lead of Congressman Paul Ryan (R-WI) and his "Roadmap for America's Future" when it comes to restructuring our entitlements.
• Don't allow earmarks to be placed during conference committees between the House and Senate.
• Install a biennial budgeting process, something promoted by Senator George Voinovich (R-OH), while also requiring supermajorities to increase in a fiscal year after a budget has been passed (for legitimate emergencies).
• Separate capital budgets from operating budgets for each department. Long term projects are very different from short term day-to-day costs.
• Instead of an executive Chief Performance Officer that gets to pick and choose what works and what doesn't under subjective criteria, have Congress create a Congressional Agency Performance Office that has some independence (like CBO) to constantly scrutinize the operations of all government agencies.
• On capital projects that go to specific state and local governments, quasi-agencies, and companies, start a Congressional Office for Spending Oversight. Just like every business has control officers, this independent office should scrutinize long term projects' spending practices. This can allow Congress to reward under-budgeted projects and punish over-budgeted projects.
• Not only should spending be posted online before it's passed. It should also be posted online when it's spent. Just like many state governments have done, the federal government's checkbook should be posted online.

Any other suggestions?

Most importantly, we need to get out in front of the President and Democrats on this. We need to be in a proactive position, not a reactive position. Reacting to earmarks and responding to Obama's signing of the omnibus bill is too easy. This is just another area where we need to develop political communication and public policy entrepreneurship.