Originally published on GrasstopsUSA.com.

            It is possible have a truly limited government and pay zero taxes for it. Yes, you read it correctly. Half of the allegedly inescapable duo of “death and taxes” is not unavoidable after all. Furthermore, it is possible to transition from the current situation of gargantuan and ever-expanding administrative state to the kind of government which requires no taxpayer contributions to maintain, performs its proper functions well, and has built-in checks against future growth. During the transition to this kind of government, it is also possible to solve the problem of monetary inflation and pay off the national debt.

            Many individuals – conservatives, libertarians, and even some of today’s liberals – desire to cut the size of government or at least to reverse its colossal growth. But no matter which party or which people have been in power, the overall size of the U. S. government has expanded consistently since the Herbert Hoover administration. Even the devotion to limited government of such individuals as Ronald Reagan failed to stop the rise of Leviathan.

            The reason why government keeps growing is not a lack of good intentions. There are plenty of people today who sincerely believe that federal power ought to be reduced, and many superb thinkers have presented sophisticated political, economic, and ethical defenses of limited government. Numerous policy proposals – including tax reform, social security privatization, welfare reduction, and the abolition of a host of federal programs – have been suggested to reduce government’s size. And yet the massive growth has continued.

            The problem is one of incentives. Under the current system, politicians are able to grow government without even being aware of doing so. They simply lobby for increased funding to a particular program they favor, or for the creation of a new public project in their district. They do not strive to expand government as such, but this is precisely what they accomplish, several million dollars at a time.

            Under the present system, one of the best ways for a politician to assure funding for his favored program is to form an alliance with another politician who is trying to do the same with his own projects of choice. “I’ll vote for your program if you vote for mine,” they say in ever so many variations, and both end up disposing of a greater amount of money than before.

            Some of these politicians might even be trying to increase spending for a legitimate program, such as a military defense initiative, but the current system places them in an uncomfortable position. In order to get their additional defense money, they must often consent to support the expansion of federal involvement in education, environmental regulation, health care, transfer payments, or taxpayer subsidies to “avant-garde artists.” So every justified government expenditure is accompanied by a host of unjustified ones, often packed into a single bill with thousands of provisions which have absolutely no relation to one another except that they grow government.

            All the good intentions in the world cannot solve this dilemma, but changing the incentives offered by the political system can. Indeed, we can imagine a simple remedy which can guarantee that the government will halt its growth and gradually diminish in size.

            The key to cutting the size of government is the implementation of an amendment to the U. S. Constitution, in three sections which might be worded in a manner similar to the following:

Section I. The United States Federal Government shall henceforth be prohibited from annually spending in excess of the dollar amount allocated for the 2008 Federal Budget. This amount shall under no circumstances be adjusted for inflation in the future. Payments of the existing national debt and the investment of public funds into interest-bearing accounts are exempt from this provision.

Section II. The United States Federal Government shall henceforth be prohibited from raising tax rates above the percentages which existed as of January 1, 2007.

Section III. The United States Federal Government shall henceforth be prohibited from spending in excess of its revenues.

            For future convenience, I shall refer to this proposal as the Fiscal Restriction Amendment. In laymen’s terms, the three sections accomplish the following: 1) prohibit the government from spending beyond the current amount, 2) abolish the raising of tax rates in perpetuity, and 3) forbid all federal deficit spending.  

            If passed, this amendment, by itself, would entirely shift the incentives offered by the American political system. Because of the ban on deficit spending, the size of government would experience an instantaneous reduction by roughly the amount of the current deficit. But the Fiscal Restriction Amendment does not specify where this reduction is to take place. Rather, it channels the political process to work this out.

            Instead of having the prospect of expanding all federal programs, politicians will now face the question of whose program is to get cut. Naturally, each politician will stand in defense of his own favored projects, but this will require him to advocate reducing somebody else’s.    Thus, instead of competing over whose program will grow the most, as they do under the current system, politicians will compete over whose program does not get eliminated. The Fiscal Restriction Amendment will fix the political pie at a size smaller than its present one and leave politicians to battle over its slices. In such a contest, there must inevitably be losers. By virtue of those losers, the size of government will shrink.

            But the initial spending cut mandated by the balanced budget clause is only the first effect of the Fiscal Restriction Amendment. Once it halts the growth of government, this amendment will work in subsequent years to dramatically reduce government’s size. It will do so by taking advantage of the present trend of monetary inflation.

            Assuming that inflation continues at an approximate 3% per year, a dollar’s real purchasing power will be cut in two in approximately 24 years. But the amendment’s first clause prohibits the government from spending beyond the nominal dollar amount that it will spend in 2008. Thus, in 2032, the government will actually be limited to at most half the real spending ability that the amendment gave it in 2008, provided that current inflation trends continue. Due to the wonders of compounding, it will take only another 23 years for the real spending limit to be cut in half again. By the year 2100, the federal government will of necessity be less than 1/15^th of its current size!

            As the government’s ability to spend money diminishes, politicians will constantly fight over whose programs are to get reduced in size. The same people who grow government under the present system will thus be turned by the Fiscal Restriction Amendment into instruments for government’s limitation – whether or not they intend to be.

            Alternatively, the politicians might not look forward to the prospects of their spending ability becoming progressively less. In this case, they will actually have an incentive to stop inflating the money supply! For the American people, this outcome, too, will be a blessing. Their hard-earned savings will not gradually dwindle away.

            But this is not all the Fiscal Restriction Amendment can accomplish. The amendment prohibits increases in the tax rates, therefore giving private citizens the security of knowing that they can always rely on a certain portion of their earnings to be truly theirs. This will be a tremendous stimulus to productive activity, resulting in vast economic growth. As the economy grows, government’s tax revenues will actually increase. However, because of the spending limit, the government will not be able to use most of these revenues to fuel its growth. Indeed, as time goes on, the Fiscal Restriction Amendment will force the government to run an ever-increasing surplus.

            What can be done with this surplus? The first and obvious answer is paying off the national debt, thereby cutting about a tenth from future annual government expenditures. After the debt has been paid off, the government will have no choice but to either cut tax rates further, allowing individuals to own more of their earnings, or to invest the surplus.

            The latter solution might even be superior from a long-term standpoint. If the government keeps investing an ever-growing surplus, there will eventually come a time when the interest alone will be as large as the government spending limit. In that case, the government will have absolutely no need of taxpayer contributions at all.

            Indeed, it might someday be possible for the American people to benefit from the useful services of government – such as the military, police, and courts – without paying a cent for them. Just as a wealthy person who has accumulated millions of dollars can comfortably live off the interest without working, so might the U. S. government someday be able to function solely off the interest from the massive surpluses it would be led to accumulate under the Fiscal Restriction Amendment.

            So there it is: an effective way to limit government’s size, fight inflation, pay off the national debt, and even render taxation unnecessary. Now to get it implemented…

Read Mr. Stolyarov's new comprehensive treatise, A Rational Cosmology, explicating such terms as the universe, matter, space, time, sound, light, life, consciousness, and volition, here.

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