Steuerle's 'Fiscal Democracy Index'

This morning, CRFB board member Gene Steuerle claimed in a USA Today article that the big problem of current deficits is not just a symptom of the annual budgeting process.  He says that in fact, the Federal government is gripped by a disease:

  "The disease? Fiscal sclerosis — setting future national priorities in stone long before the future has arrived. Our fiscal arteries are so clogged and hardened that to do anything new, meet any emergency, or engage any new opportunity, the president must renege on past legislators' promises regarding Medicare, Medicaid, Social Security and other such entitlement programs. If he doesn't address unsustainable promises head-on, Obama will have no wiggle room in the budget for the rest of his presidency, and government will be tied up with yesterday's problems and the demands of yesterday's voters."

Steuerle has a measure that determines how much discretion Congress has in attempting to make a budget: his own "fiscal democracy index," which measures the percentage of federal tax revenues that are not allocated to mandatory spending programs.  Over the past fifty years, it's dropped significantly, going from 65 percent in 1962 to well below zero in 2009; almost half of that decline came in just the past year.  Unfortunately, the outlook doesn't improve when the economy does.

"The index is poised to enter the dead zone again later this decade under current law if the president and the Congress don't take more spending and tax subsidy programs off the automatic growth path and then match up revenues to whatever size government they think is right for the times. In particular, they must constrain, cap or set triggers on how much future health, retirement and tax subsidies — the big ticket items — can grow without any vote by Congress."

The index presents another dimension to the explosion of mandatory programs.  If we can't get entitlements under control soon, it will severely limit the ability of future generations to set their own priorities.

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