Cost of Government Day (COGD)
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Copyright 2003 FDCH e-Media, Inc.
(f/k/a Federal Document Clearing House, Inc.)
FDCH Political Transcripts
July 11, 2003 Friday

TYPE: NEWS CONFERENCE

LENGTH: 9639 words

HEADLINE: GROVER NORQUIST HOLDS NEWS CONFERENCE ON "COST OF GOVERNMENT DAY"

SPEAKER:
GROVER NORQUIST, PRESIDENT, AMERICANS FOR TAX REFORM

LOCATION: WASHINGTON, D.C.

BODY:

AMERICANS FOR TAX REFORM HOLD A NEWS CONFERENCE ON "COST OF
GOVERNMENT DAY"

JULY 11, 2003

SPEAKERS:
U.S. REPRESENTATIVE KEVIN BRADY (R-TX)

U.S. REPRESENTATIVE J.D. HAYWORTH (R-AZ)

GROVER NORQUIST
PRESIDENT
AMERICANS FOR TAX REFORM

BRIAN M. RIEDL
BUDGET ANALYST
HERITAGE FOUNDATION

CHRIS EDWARDS
DIRECTOR, FISCAL POLICY STUDIES
CATO INSTITUTE:

TOM SCHATZ
PRESIDENT
CITIZENS AGAINST GOVERNMENT WASTE

SCOTT HODGE
EXECUTIVE DIRECTOR
TAX FOUNDATION

DANIEL CLIFTON
ECONOMIST

NORQUIST: Hi. Thank you for joining us today.

My name is Grover Norquist. I serve as president of Americans for Tax Reform. And we're talking today about Cost of Government Day. Americans for Tax Reform is releasing a report that points out that if you take all the cost of government, not just taxes, but total spending, federal, state and local, and add to it a -- small "C" -- conservative estimate of the regulatory burden, Americans work until today, July 11, this year, to pay the total cost of government.

So government spending, plus the regulatory burden, takes more than half of the income of the American people. We are now six months plus July 11 -- January, February, March, April, May, June, plus 11 days into July, past July 4 -- to pay for the cost of government.

Kevin Brady, congressman from Texas was going to be introducing this press conference today. Playing congressional baseball for charity last night, unfortunately he broke a shoulder and is not with us. Hopefully he's feeling better and will get better soon. But we did hope that Congressman Brady would be with us today. I don't know whether he won or lost the baseball game...

(LAUGHTER)

... but his shoulder took it.

A couple of thoughts, and then we have a distinguished group with us to talk about the growth of government spending and the growth of the cost of government. And that is that this is not just a problem -- I mean, we're here in Washington, D.C. in a House office building. This is not just a Washington problem. The cost of government is federal spending and federal regulations, large chunk of it, but also state spending and local government spending.

And in fact, over the last five years the most rapid growth of spending has not been in Washington, although there's been plenty of that, but at the state level, runaway spending at the state level has really begun to damage.

And you see with the stories of California spending itself into bankruptcy and other states, like Colorado and Texas and Florida doing a good job of reining -- or better job -- of reining in spending, states really are making a difference in whether or not these budgets are coming in at a reasonable level or whether you have runaway spending.

So it's not just Washington and it's not just spending, it includes the regulatory burden which has continued to grow at the federal and the state level.

The other challenge we have is that many of us started with Americans for Tax Reform are very pleased with how this administration and this House and Senate have cut taxes each year and promise to cut taxes each year that they're in power. And that's an important step forward in creating economic growth and giving people more economic liberty.

And the center-right coalition, the taxpayer movement, the conservative movement, has won the argument in Washington: We're not raising taxes. President Bush has gone beyond that to not only not raising taxes, we're going to cut taxes every year.

There is now another challenge in front of us as activists, and that is to create the conditions that make it possible for elected officials to say not only "no" to tax increases, but "no" to the spending interests. And that challenge is before us, and frankly we haven't done as good a job as we need to do. It's not the fault of politicians that they don't do what we ask them to. It's our job to make it possible for them to say no to the spending interests, and eventually necessary for them to say no to the spending interests.

And we have a lot of work ahead of us, as these charts show. We are unfortunately heading in the wrong direction.

Dan Clifton, chief economist and the author of the Cost of Government Day report.

Dan?

CLIFTON: Thank you.

Before I begin, I want to say that Congressman Brady does have a statement. So although he could not speak here today, there is a written statement for him.

Grover's absolutely correct about the Cost of Government Day. And what I'm going to do is briefly go over the trends and the components, as well as the history, and then allow these distinguished speakers to kind of provide the anecdotal and empirical evidence to what is driving the Cost of Government Day index.

Cost of Government Day is July 11. This is an increase of four and a half days from last year. It is now 17 additional days in just the past three years. That is a 10 percent increase in the cost of government in three years.

Although it's been increasing for two years, this year's increase is become very alarming. All four variables have significantly increased this year, and we are now at the highest level since 1993.

The cost of government index declined from 1992 to 2000 every single year. That's eight years of decline. The American taxpayer had to work 20 days less in 2000 than they did in 1992.

However, in just the past three years, 17 of those 20 days have been completely eliminated. And I want to show you how it's not just the federal spending, not just the federal regulations, but also at the state and local level.

Consider these facts.

After declining for eight straight years, federal spending has been nearly wiped out every decline over the past eight years, in just three years.

State and local spending has increased for five years in a row and is now at its highest level ever in American history.

Regulatory cost, after this year's numbers, are now at its highest level since 1983. What that means is, all the reforms that President Ronald Reagan instituted in the '80s to reduce the paperwork, to reduce the regulatory burden on entrepreneurs, has now been completely eliminated.

Just a quick point about the four variables, and then I'll have these people speak.

Federal spending now composes 87 days out of the year. This is 10 additional days since 2000. And 60 percent of the increase since 2000 is directly attributable to federal spending.

State and local spending has been on a tear. As the chart shows, since 1998 they have led the way, much greater than the federal government, in increasing the cost of government.

In 1997, the federal government cut the capital gains tax. The states became flush with revenue. They've continued to spend that money. Even with downturn in revenues, they continue to spend and they're raising taxes on working families.

CLIFTON: Finally, regarding regulation, driving regulation has been the increasing cost of tax compliance since 1997. As Scott Hodge will talk about, without tax reform Americans are not only burdened by paying taxes, but the cost of complying.

And I will leave it at that.

And our first speaker will be Tom Schatz, president of Citizens Against Government Waste.

Thank you.

SCHATZ: Thank you very much, Dan.

And thank you, Grover, for putting on this excellent presentation, because it is important to continue to look at not just spending but regulation -- the kinds of things people don't see on a daily basis, but certainly affect everybody in the United States.

As everything else has this year, spending on pork has also increased to record levels. Twenty two point five billion dollars, our Congressional Pig Book, 9,362 individual projects this year, which is a 48 percent increase over just two years.

Right now, they're doing all the fiscal 2004 appropriations bills and in a positive light, the homeland security bill at least in the House came out without any earmarks, without any pork. When it gets to the Senate, who knows, because senators do tend to add a lot more than members of the House.

The military construction bill -- we just issued our first pork alert for 2004. Senator Ted Stevens, once again, chairman of the committee and a Republican has more than $42 million already, including $1.4 million for a new working dog kennel at Elmendorf Air Force Base. So you could say that our tax dollars are already going to the dogs this year.

It's not just the Pig Book, it's other areas of spending. Grover mentioned that we are finally recognizing that this is an area that is out of control. We have a $400 billion deficit. We're paying $328 billion just for interest on the national debt. And if you think about that number, it's a big one, but it gets even bigger because over the next five years, the subsequent five years after this year we're going to be paying $2.1 trillion just for interest on the national debt.

And it doesn't matter what your priorities are here in Washington, or anywhere else in the country -- when you're using that much money just to pay interest on the debt, you are heading down the road to bankruptcy.

So without control of spending, without enough members of the House and Senate who will vote to eliminate pork and vote to cut down the size of government and reduce regulations, we're not going to be able to get all of this spending under control and the Cost of Government Day will continue to be later and later every year.

The people here today are all working hard to bring these areas of spending and regulation under control, and we need all the help we can get from around the country from taxpayers who will demand that their legislators act in a more fiscally responsible manner in order to move in the right direction.

Thank you.

RIEDL: I would first like to thank Grover Norquist, Dan Clifton and everyone at Americans For Tax Reform for the tireless work they do on the efforts of cutting taxes and helping all taxpayers.

I am Brian Riedl from the Heritage Foundation, and I am going to speak briefly on the increasing federal spending.

In 1999, the federal government spent $16,000 per household. In 2003, four years later, the federal government will spend $21,000 per household. That $21,000 per household is the most the federal government has spent since World War II adjusting for inflation.

That $5,000 per household spending increase since 1999 means that eventually Congress will have to raise taxes by $5,000 per household, because in the long run everything government spends has to be paid for in taxes.

Now, some say, of course spending is going up -- we're at war. That is true. But defense is responsible for just one-third of the spending increase. Where has the rest gone?

Well, of course Social Security and Medicare, but we've also seen massive spending increases for farm subsidies, highways, education, health research and dozens of lower priority programs that most taxpayers have never even heard of.

Now, certainly some of these programs are worthy. I don't want to say that none of these programs are good investments, but certainly the government has to set priorities.

If we throw money at every program under the sun, we're going to have raise taxes through the roof.

If government cannot say no to any programs, then most of the families who are going to be faced with a $5,000 per household tax increase are going to be forced to say no to making their mortgage payments, to saving for retirement, saving for their children's education and buying health insurance.

Whenever times get tough in Washington, a lot of people turn to ask, well, what happens when the government runs out of money?

RIEDL: I think the better question that we should be asking over the next couple of years is, what happens when the taxpayers run out of money?

And with that, I will turn it over to Chris Edwards from Cato who will discuss state spending.

EDWARDS: Thanks a lot, Brian.

And thanks a lot Dan and Grover for putting a Cost of Government Day together.

When you think about a cost of government, it is really the most fundamental public policy issue that Americans should be thinking about all the time and whenever they vote. I'm going to talk a little bit about state governments and what they've been up to the last couple of years.

We've heard a lot of moaning and groaning from the nation's governors that they're innocent victims of an uncontrolled fiscal crisis that they seem to have nothing to with. And yet, you look at the official government data on total state and local spending, total state and local government spending hit a peak of 13 percent of the nation's economy last year. That's the highest in decades. So if the states are short of money, it's because they're spending far too much, frankly.

The governors are blaming everything but their own reckless spending during the 1990s for their budget woes. But we've calculated that if states had just kept their 1990s spending increases to inflation plus population growth, spending would be $93 billion less today and states would not be in a crisis.

We hear a lot today about state governors are saying that they have to raise taxes to avert what they claim are Draconian spending cuts. But if you look at the latest data from the National Governors Association, you'll see that overall state budgets are essentially frozen, but they're not being cut.

It is true that some states are trimming spending. But why shouldn't they after years of rapid increases? Why shouldn't states be cutting when businesses and households have had to cut back themselves because wages and profits have stagnated. Americans have less money for their own needs, let alone having extra to hand over to even bigger governments.

And California is really the greatest example of what happened with state budgets during the 1990s. California spending started to rapidly accelerate around 1996. General fund spending in the state hit $67 billion in fiscal 2000. Then in one year, 2001, it leaped $11 billion. Now, two years in a row, California has had to cut; that's true, but only $2 billion. So the California budget now is still far above the level it was as recently as 2001.

And California is also a great lesson, how states could avoid such budget crunches in the future. California heavily depends on capital gains and corporate profits taxes. The California government boom of the late '90s was fueled by about $18 billion of capital gains and stock option tax revenue at its peak in 2001. That revenue has now plummeted with the high-tech bust in California. So to avoid that boom-bust cycle that California's experienced, states such as California should move away from volatile capital gains taxes and stock options taxes and move to more stable sales taxes.

Also, it's important to recognize that local governments are in a far different situation than state governments. Cities and counties have benefited from a gusher of property tax revenues in recent years as property assessments have continued to rise across the country. Most recent data shows that property tax revenues are up 5.5 percent over last year. So once place that state governments should cut and, frankly, is their transfer to local government. Unfortunately, we're looking at about $18 billion of state tax hikes next year. That's even bigger than the previous record set in 1992.

But frankly states more than ever are shooting themselves in the foot when they raise taxes. That's because Americans are more mobile than ever. Entrepreneurs and businesses move to low-tax states over time. And governments won't get the revenue they think they're going to get from these tax hikes, and state growth and incomes will be reduced.

EDWARDS: Not only that, but state tax hikes, not even the most demonized product, tobacco, have a serious negative side effects. Cigarette consumers have been the favorite target of state governments in the last couple of years. But state government greed fuels the high cigarette smuggling. It strengthens organized crime through that smuggling and even provides a funding source for terrorism. So there are really negative side effects of even taxing demonized products such as tobacco.

State governments should be treating the current slowdown as an opportunity to weed out the excesses that were built up during the '90s. They should be looking for unneeded programs to terminate or to privatize and to provide the lean and efficient state governments that American tax payers deserve.

Thanks.

(UNKNOWN): Thank you, Chris and Grover, Dan, for this annual report in bringing us together today. Regulation is indeed increasing, the regulatory burden is at its highest level in 20 years, and for reasons beyond just tax compliance, of course. Politics have an awful lot to do with it. It's continued to rise as a percentage of national income, and that is a bipartisan achievement -- a rare one. Parity has come to the world of burdensome regulation.

And of all of these rules, regardless of merit, none of them have received serious congressional consideration for a veto under the new power, if you will -- almost 10 years old -- of congressional review. Profiles in courage in containing the regulatory state is pamphlet- length at best.

Ironically, the increasingly shrill claims that are used by the regulators and legislators we're now seeing increasingly are necessitated by the very economic conditions that the increasing regulatory state has created.

When economic activity slows, people are less willing to accept ever more costly restrictions. Only wealthy societies are prepared to pay for environmental regulations. Only those in flush times will be willing to allow it to be piled on without an awfully good reason. This is because regulations are not cost-free, and those costs are directly tied to reductions in human health.

So how did even limited government types allow this regulatory state to get where it is?

Consider environmental regulations. EPA alone is about 10 percent of that in the pipeline. Congress has the tools, but the agency is allowed to get away scot-free. For example, the then most expensive regulatory proposal in our history: the Clinton administration's PM Ozone Clean Air Act rules. EPA used claims of 40,000 people a year dying if they don't get what they want.

Now emergency authority has been invoked to save a dozen leatherback turtles, migratory birds, bighorn sheep. And FOIA, the Freedom of Information Act, revealed that not one moment's thought was given to invoking emergency authorities when, if EPA was to undertake in the standard rule-making process, they're admitting that they are allowing 40,000 people to die needlessly that they could have saved.

Is this because they don't care, or because their claims are false? I think the latter is obviously the case. So they got away scot-free. Congress did not hold their feet to the fire, demanding that obscene body counts be followed by invoking emergency authority. Because then, you institute the rule at the time and debate the merits while it's purportedly, though not really, saving thousands.

As regards to this, well, the Freedom of Information Act remains a wonderful tool for regular citizens as well to play congressional oversight body.

Exercising this authority, no matter what death toll you allege, however, reverses the burden of proof, which is why you hear agencies say that I am going to go through a regular rule-making process and allow 30,000 to 60,000 people die -- not really -- for the convenience of undertaking a standard process because the burden of proof is shifted.

And no longer can an agency hide behind that which is perpetuated the regulatory state -- this almost impossible burden of proving that the agency was arbitrary and capricious. Suddenly, they have to justify what they did. And you'll notice that they'll do anything to avoid that, including saying 40,000 people a year are acceptable losses.

At this very moment, we hear remarkably similar claims from certain senators. And why not? No one is holding them to their claims.

So hysterical claims are made to cow opponents. Agencies supposedly allow thousands to die -- not really -- and Congress serially ignores its power to step in. In an age where wealth is created in ever cleaner environment, claims become more hysterical to make the idea of questioning the agenda seem inhumane, unthinkable.

(UNKNOWN): It's time for cost-benefit analysis, widespread.

It's time for agencies to obey data quality laws. The Bush administration refuses to implement them.

And Congress, it's time for them to exercise real oversight.

HODGE: Good morning. I'm Scott Hodge, executive director of the Tax Foundation. And I'd like to thank Grover and Dan for bringing the Cost of Government Day to America's attention. I'd like to thank them both inviting me to talk about one of the rising, fastest-growing components of Cost of Government Day, and that's the rising compliance burden on you and I, the American taxpayer.

Now, every year the Tax Foundation calculates Tax Freedom Day, which is a day which we all work toward to pay our taxes at the federal, state and local level, and beyond that, we begin to work for our own families' bills.

Tax Freedom Day this year was a historic success, thanks to the tax cuts of the last three years. America's tax burden reached its highest point in the year 2000, where Americans worked until April 30 to pay their entire tax bill.

But thanks to the tax cuts of the last three years, America's tax burden has been reduced by 12 days and now falls on April 18. That's the good news.

The bad news is that while Americans' federal tax burden is being cut thanks to the efforts of this Congress and this president, America's compliance tax burden is going up.

Americans this year will spend nearly 6 billion hours to comply with just the federal income tax code alone for both businesses and individuals. Six billion hours just to fill out the paperwork, just to keep the records.

That does not include all the time that goes into accountants and lawyers and lobbying and all the other things that goes into America's federal tax code system.

To put that in dollar terms, that's equal to a little over $200 billion a year in lost productivity.

To put that in perspective, that's greater than the total income of ExxonMobil last year, which is America's second largest corporation.

So America's compliance tax burden, which now equals about 2.2 percent of our gross national product, is swamping the efforts and productivity of some of our largest companies. That's what we call in economics, dead weight loss to society.

That returns nothing to our livelihoods and the increased productivity and energies of this country.

Now, if we add up this compliance burden over the next five years, we're looking at some frightening costs. Over $1 trillion in lost productivity will go to complying with the federal tax code alone over the next five years. That swamps many of the benefits that we're going to get from all of the tax cuts that we've enjoyed over the last three years and hopefully will enjoy in the succeeding years.

HODGE: We can all applaud Congress's efforts and the White House's efforts to cut our tax bill, but it's time to cut our compliance tax because that is beginning to swamp our economy and our productivity, and it's becoming lost energy that's going to slow this economy down.

It's time to start looking at the tax code and finding ways in which we can simplify this tax code, streamline it, because America deserves a tax code that they can trust and a tax code that respects them.

And right now, the tax code does not respect the American people, it's saddling them with a cost that they can no longer afford. It's time for a change.

And thank you to Grover and Dan.

NORQUIST: Thank you.

We'll all take questions in a moment.

We're now in Washington, D.C. going through the appropriations process and Congress is arguing about how much money the House and the Senate want to spend on various issues.

And at the state level, a lot of states have finished for the year their efforts to spend your money, and some of them trying to raise taxes, and I think there are some lessons here.

I think we may want to look in Washington at term-limiting the appropriators, the people who sit on those committees that spend money. There has been some real progress over the last six years because we term-limited committee chairmen. Those of you who are students of Washington, D.C. remember years ago when Congressmen -- Chairman Dingell and Chairman Rostenkowski and Chairman Jack Brooks were little dictators -- not little -- big dictators over huge chunks of the budget, huge chunks of power in Washington, D.C.

And presidents, and speaker of the House, and leaders of the Senate had very little ability, or the public had little or no ability to discipline the power that these people wielded in all sorts of areas of our lives with these committee chairmen.

By term-limiting them to six years, and now they've all passed on -- the folks who started as chairmen in '95 have had to move on and many of them left office rather than stay as mere mortals in the House of Representatives, not being chairmen.

I think if we look at term-limiting appropriators as we term- limit the Budget Committee -- being on the Budget Committee, you can do that for six years and then you got to do something else -- perhaps that's a reform that would not divide this town.

People say there are three parties in Washington, D.C. -- the Republicans, the Democrats and the appropriators, and that's painfully true in many respects.

People who come to Washington, D.C. promising their constituents they're going to be tight with the dollar, that they're not going to become wasteful spenders, some of them get on normal committees and keep their word; others become appropriators and it changes the nature of who they are and the incentives that they face.

Looking at the states, the 50 states, I think one of the great things with the 50 states is that there is not one of them, there are 50 of them.

NORQUIST: And there's a wonderful saying that nobody's life is a complete waste, some people serve as bad examples. And this is true about governors, and states as well.

Governor Gray Davis and the state of California serve as a bad example. "Don't do this," California says to the rest of the country. And of course, this made-up argument that this is just something that fell on their shoulders and who the heck knew where this was coming from and how in the world did this happen, would make more sense if states next to them and across the country hadn't anticipated the challenges that California faced and handled them competently, as opposed to incompetently.

Governors, like Governor Owens of Colorado has governed the state, unlike Gray Davis, who has failed to govern California, has decided he'll just ask people for more money to fund all the stuff that they've been doing without thinking about, and they didn't intend to do any thinking, and he doesn't intend to do any thinking. They're recalling him and he still refuses to do any governing in the state.

And California is not alone as a bad example. Governor Riley, Republican, former member of the House of Representatives, left Washington, solid vote when he was here in Washington against big government, gone down to Alabama, and he's decided to loot the good people of Alabama to the tune of $1 billion. No reforms. No budget restraint. No governing. He's not doing the job he said he was going to do when he wanted to be governor. He's not being governor. He's going to be tax collector for somebody else who will be governor, whoever's governing the state, making the decisions is fine. He's just going to go out and pick people's pockets until the guys who actually run the state -- wherever that responsibility lies; it obviously doesn't in Alabama lie with the governor. He's going to go raise money from everybody and pay for all the mistakes of the past, all the miscalculations of the past and continue to do so.

And then we have really sad states, like Nevada, Governor Kenny Guinn, Republican governor of Nevada, who has decided they didn't spend themselves into bankruptcy as California did, as some other states did, but he would like to start now. So he has a $1 billion tax increase not to fund previous problems, not to fund mistakes that were made or commitments that, you know, perhaps shouldn't have been made in the past, but mistakes he intends to make. OK?

Confession doesn't work that way. You can't do it proactively, and say "I'm now going to be really irresponsible and I'm going to raise taxes in order to do it."

So Nevada has decided that they didn't spend terribly irresponsibly in the previous 10 years, but they intend to start now.

Texas, Governor Perry has reined in spending: no tax increase balancing the budget.

Florida, Jeb Bush, no tax increase. In fact, tax reductions and reining in spending.

I was just in New Hampshire. Governor Benson, newly elected Republican governor of New Hampshire; and he has said to the legislature -- he vetoed the budget.

When we get into the question of what should we do differently, because we've sort of got the tax part of this down. We figured out, no new taxes, Americans for Tax Reform asked candidates for president, the House and Senate, take the pledge, promise not to raise taxes. We have President George W. Bush has taken the pledge, 217 members of the House, 41 senators, 1,200 state legislators, eight governors, taken the pledge, won't raise taxes, and they generally keep it. And when they don't, we come and gnaw on their ankles and remind voters that somebody's failed to keep the pledge. So we've got that down.

And President Bush has gone beyond that to annual tax cut. Very successful, very helpful, moving in the right direction.

The challenge for us now is what do we do? What's the pledge equivalent for spending? What are the rules? They have two-thirds requirement to raise taxes in Nevada, two-thirds requirement of the legislature to raise taxes in California. So with that constitutional amendment, two-thirds requirement in Arizona, super majority in Oregon, two-thirds requirement in South Dakota. So we have a constitutional amendment that I think we ought to share with other states that says, "It should be difficult to raise taxes," and it is difficult to raise taxes in those states.

NORQUIST: And it is difficult to raise taxes in those states. We need a similar constitutional amendment to make it difficult or impossible to overspend.

In Colorado, they have TABOR, the Taxpayer Bill of Rights, that say if spending goes faster than the growth of the economy it has to be rebated, that the revenue has to be rebated through an income tax rebate to all the citizens. When the economy is doing well and money comes rolling in, no thanks to anything that the government of Colorado is doing, money comes in and it comes in faster than the economy is growing, it has to go back to taxpayers.

So Colorado didn't get in the mess that California and New York got themselves in by overspending, because they had that kind of protection.

I know there are meetings going on right now about trying to do a constitutional amendment like that in California. They had one a dozen years ago, and they gutted it, which is why they're in the problem they are now.

But we need constitutional amendments at the state level like TABOR, and I'm not wedded -- I don't know that any of us are wedded to any one solution. But we need to figure out what it is, because we have successfully focused on the tax side, and we as a conservative movement, as taxpayer advocates, as conservatives, have not focused sufficiently on reining in spending in a way that makes it possible, necessary and hopefully eventually easy for elected officials to say, as they do with taxes, "Love to help you, taxes are off the table, I took the pledge." End of discussion.

A lot of governors, a lot of state legislators, a lot of congressman, senators, the present president find it very easy to say no to tax increases.

It's our job, our challenge to make it easy for them to say the same thing on spending and runaway spending and again, not just in Washington, but at the state level and the local level where over the last five years it's been worse than in Washington, and it's pretty bad here.

We have a distinguished panel of experts on government spending and regulatory burdens. Questions, thoughts, arguments?

Yes?

QUESTION: This is to anyone on the panel who wants to address it: With so many lawmakers introducing spending bills and tacking the word anti-terrorism or homeland defense or homeland security in there, whether it has anything to do with that or not, how can you combat that from a public relations standpoint?

NORQUIST: Let me start and then -- this is a real challenge.

But it's not just, you know, patriotism being the last refuge of the scoundrel. Everything is the last refuge of the spender. If we didn't have the war on terror, the same characters would have the same pieces of legislation that have been on their desks for years, they'd pull it out, instead of stamping terrorism on it they'd stamp some other crisis.

It's like a bad game of Jeopardy, right? It doesn't matter what the questions are; the answers are all the same: "We've got to spend more money because of -- oh, I'm sorry, because of terrorism. I'm sorry, is it terror? Yes."

(LAUGHTER)

And it really does get ridiculous, and it's sad and it insults the legitimate needs of the Defense Department and Homeland Security, because there are real things that were done -- that need to be spent.

Go back to how this country and this government reacted when it was run by adults during the Korean War. They went and did, like, a 25 percent cut across the board on everybody else's budget to fund the Korean War: "We have a real problem. It's a real challenge. We're going to spend real money in a war in Korea, and you know what, we're going to spend less on everything else because this is important."

The message sent by people who claim to care about terrorism is: "Terrorism is so important. It just happens to be less important than everything else the federal government is doing, so the only money that we could possibly spend on it could not possibly come from pork barrel spending or anything like that, must come from some new source."

And what they're saying is not the fight against terrorism is important. Politicians who tell you they need taxes or spending to fight the war on terrorism in a multibillion dollar budget are telling you that is the least important thing on their mind, and they want to do everything else just the way they did it first and they'll just add on the other stuff.

NORQUIST: So they're actually giving away their game plan when they tell you we have to spend this money for terrorism, and it can't come with an offset from something else.

(UNKNOWN): When Congress considered the supplemental bill to fund the war in Iraq -- it was about $78 billion -- the House actually included in its bill absolutely no additional spending, no earmarks. Not to say all $78 billion was good, bad or indifferent, but they didn't go above what the president had requested. And the Senate added about $750 million. The House stood by its principles, for once, and said, no, and they actually reduced that down to $350 million.

Homeland Security bill, $29.4 billion for fiscal 2004 -- exactly what the president asked for -- the House again added nothing. And I think that we have to say that that's a positive thing.

We don't say many nice things about Congress, but when they do something good, we should let them know that they're moving in the right direction.

Again, not all $29.4 billion may be essential, but at least there are no pork-barrel projects in the House version of that bill.

And the groups here, and others who know about that should say, and make it clear, that that's the direction we want to move in which is not to add on all these additional projects.

But it's true, there have been a lot of programs that have been touted as essential to homeland security.

We have to make sure that we don't build a wall around West Virginia and Alaska and forget about New York and Washington and all the cities that are really threatened.

And with Chris Cox in charge of the Homeland Security Committee here in the House, and others, they are making the point that money should be directed where it's truly needed. And that's really what we should be following in that particular area of spending.

CHRIS HORNER, SENIOR FELLOW, COMPETITIVE ENTERPRISE INSTITUTE: Jim, first, I was remiss. In a rare instance of refusing to self promote, I didn't identify myself. I'm Chris Horner, senior fellow with Competitive Enterprise Institute.

And briefly, there's no such thing as prioritization of spending until there is a spending cap. And the president previously issued a rare, though increasingly less rare, veto threat if spending exceeded certain levels. Now it depends on where you place the cap, of course, but until there's prioritization forced through a cap, all groups will cite and all members will cite their pet projects as somehow relating to terrorism. We see even industry groups fighting completely unrelated measures by saying "this funds terrorism."

So the reason is, obviously somebody's focus-grouped this and it works. But it will only stop working once you prioritize and compare it to another initiative and you say, "We're in a deficit situation." You say deficits are bad. Which is more important?

(UNKNOWN): I think one of the ironies to me is that tax cuts to stimulate the economy and to get people back to working again have to be offset in Washington by congressional rules, by cuts in spending, in particular entitlement spending, or they need to be matched by tax increases elsewhere.

Yet on the other hand, billions of dollars worth of pork-barrel spending can be spent willy-nilly without requiring any other offsets somewhere else in the budget. And I think we all know that the budget is rife with fat and pork that should be cut out and in fact should have been cut out years if not decades ago, and there is no mechanism to force Congress to do that.

Everyone in Washington has the authority to spend our tax dollars, but no one is responsible for how it is spent. And until we begin to institute some new rules which force some sort of off-setting behavior, we will continue to see that money misspent and new programs added to old programs, and old programs simply never die.

QUESTION: Just on your proposal about term-limiting appropriators: Who are the advocates up here for that? How far is it along? And wouldn't it make it worse in the sense that, you know, instead of having the sense of I guess a duty to govern if you have a more permanent seat, you know, lawmakers might look at it as my chance to grab what I can.

NORQUIST: The question was on the issue of term-limiting appropriators -- people being on the spending committees. If you limited them to doing that for six years during a career, might you -- as I hope and some others have said this may be a solution -- people would come on and say, "I will for six years try and spend wisely, but eventually I'm not going to be on the committee, and so, it's not in my interest to log-roll, trade my spending for somebody else's spending, because I'm not going to need something for him three years from now, five years from now."

So a lot of the problem with log-rolling is not I trade my vote to you this year or for your vote this year; it's I trade you my vote year after year because someday I may need your vote -- 20 years from now, 10 years from now. And so I think that's the argument and the thought.

I have shared this with a number of folks on Capitol Hill, including some in leadership who are intrigued about the idea.

Because I keep asking the question you just asked. Before I go running around promoting this reform, is this helpful or does it hurt? Are you simply spreading the disease? Would you turn all House and Senate members into appropriators by doing this? And then they're saying, "I'm going to get in and be like a Roman provincial governor." You go in and while you're governor, that's not your two years or three years to be a virtuous governor; it's your two years or three years to loot province. And then you come back with all your money.

Would that happen? Maybe.

And that's why it is being raised today and over time as an idea that I want to vet past a lot of smart people who have been in this town for a long time. And I will defer to their -- obviously it only happens if the leadership in the House and Senate -- I mean, the majorities of the House and Senate, Republican Party as the governing bodies -- agree to do this.

They did term-limit chairmen. That I think we can point to as an incredibly important step in the right direction in disciplining -- the goal isn't to seize power; the goal is to reduce power that anyone has over other people's lives.

NORQUIST: And so by eliminating chairmen for life -- and people can only be chairman of a committee for six years -- that power didn't flow somewhere else that people abused. That power disappeared. It isn't wielded by anybody over people's lives.

And my hope is that term-limiting appropriators, we would see not that power floated here or here or the leadership or the caucus or some other entity, but that it would disappear. And therefore there would be less ability and interest in spending.

But the question you raise is: Might this make things worse? This town and history is littered with the remains of reformers who came up with really good ideas that did either nothing or the opposite of what they intended to do.

So I am here suggesting this as an idea fully with the understanding that I'm willing to be argued, "No, Grover, that wouldn't help. That might hurt. Here are three other things."

And I guess at the national level -- we've seen at the state level a bunch of ideas that worked: the TABOR amendments, two-thirds requirements to raise taxes. I think we should have two-thirds requirements to spend money.

Sunset laws have sometimes worked at the state level. Others, they've been worked around.

We need to come up with a change in the incentives for elected officials, because right now, the incentives are "spend."

We've changed the incentives on taxes. We should be very happy at the tremendous success we've had and made on the tax front. And now we need to focus on spending.

And again, I'm not here to tell you that this governor's a jerk or this politician's failed to live up to our goals for him or her. It's our job to get out in front of those elected officials and lay the groundwork so that it's easy and eventually necessary for them to do the right thing.

Does anybody else have a thought on the appropriators, whether that's a good idea or bad idea? Or frankly, whether we do that or not, a different federal reform?

Take another question while we think about that.

Yes.

QUESTION: You said at the beginning that President Bush deserves a lot of credit for the work that he's done in cutting taxes as a component of this over the last couple of years. But also, looking at your report, I've noticed that -- and I think that it's even been said that the "cost of government day" has falling back 17 days since 2000.

And do you think that the Bush administration deserves to take some of the criticism for that?

NORQUIST: Well, there are several pieces to it. The answer is yes, some criticism, but I want to be reasonable in attributing credit/blame for this.

State and local spending is the responsibility of governors and state legislators. And that's worse than the federal government. That doesn't mean that the federal government is good because it's less bad, but states have actually been worse stewards of the people's money than the federal government.

And for those federalists who think, "Oh, government closest to the people is, by definition, better," they're just easier to get into your pocket if they're closer to you.

And so it's not necessarily been better government, at least not in the last ten years, if it ever was.

So part of that is state and local taxes and regulatory burden.

Part of that is to slow down an economic growth that came starting at the end of the Clinton administration, the burst of the tech bubble and so on. That makes the total spending as a percentage of the economy move upwards, even if they're being somewhat reasonable. They're not being reasonable. They're not having spending restraint. But if you did have spending restraint and an economic slowdown, those charts would move in the wrong direction but not as sharply as they do.

That said, the House and the Senate are spending too much. And the White House, the president, has signed bills that spend too much.

I tend to think that the House and the Senate bear the primary responsibility as the guys who spend money. It is very difficult for a president to take a look at a great big bill and veto it because the 10 percent is overspending, or the 20 percent that's overspending, or the pork barrel in there, unless we do our job and make it easy for him to do that.

Remember when Reagan vetoed spending because it was too big, they said "he shut down the government" as opposed to "Congress spent too much."

So it's tough sometimes for presidents to wield that unless they say it 12 times in a row, or we on the outside make the case sufficiently that it's easier for the president to do that.

That said, I would have liked a veto of the agriculture subsidy bill.

NORQUIST: I mean, there are a number of bills that I think recommend themselves as veto bait, and it is a challenge.

Would I like the House, the Senate and the president to do our job for us? Yes, absolutely, that would be very nice. I can go retire.

Do I expect them to? No, I expect to work with them to bring some discipline. And we need to come up with incentives to make it easy for them to do the right thing and then eventually necessary to do the right thing.

Other thoughts on the culpability of House and Senate?

RIEDL (?): One quick thought. When linking fiscal year spending to presidents, it's important to note that President Bush took office in January 2001. And the first budget he worked on, which even he got in at the end, was a 2002 budget. So when we are linking fiscal year spending to presidents, it's always important to recognize the 2000 budget, and most of what happened in 2001 was under the Clinton administration. Again, that's not to assign blame to either person, but just to look at when the budgets were written.

(UNKNOWN): I guess I would differ a little bit from Grover. It seems to me that spending is not going to be cut without presidential leadership, and I really don't see it the last few years.

The president, if he has a bolder spending cut plan, he provides cover for members of his own party in Congress. And you know, the budget came out with a 4 percent increase, which I thought the politics of it was interesting, because the president and his budget director thought that was a really lean sort of almost cutting budget, but it wasn't. I mean, 4 percent increase during, you know, a period of recession is not, you know, a very substantial lean government.

I was just looking yesterday at the OMB, the administration's official statement on the House Labor-HHS-Education appropriations bill. It was full of sort of welfare-statist sort of complaints about, you know, this program did not get funded as much as the president wanted it; you know, that social program is underfunded, et cetera, et cetera.

In all honesty, a lot of the rhetoric, it's really no different on a lot of these welfare state programs than under the last administration.

So I don't think -- unless the president is bolder and provides cover for members of the House and the Senate who do want to cut spending, I don't think it's going to happen.

SCHATZ: There's certainly a point to be made about what the president's budget says, the Republicans are in charge. There's no more excuses about how much is being spent. That said, the president doesn't have enough votes if he came in and said, "I want 2 percent or 1 percent or a cut." There are members of his own party, many members of his own party, who like to spend money.

If you look at the pork-barrel list, in particular in our Pig Book, Senator Stevens of Alaska, number one. And you see down the list members of the list members of the Senate, very bipartisan when it comes to spending here in Washington.

So Grover's absolutely right. We have to change the culture, change incentives, because the president should not be out there banging his head against the wall. He should be able to feel somewhat comfortable about going out and saying, "I want 2 percent. I have the votes," you know, "I have the leadership." And I think that takes time.

When Mitch Daniels came in as OMB director, one of the first things he said was that we would like to offer less spending, but we just don't have enough votes right now. You essentially need 56 or 58 in the Senate. They have 52, and out of those 52 they don't even have all of them all the time.

So as we've said, you can have a good plan. You can have all the information from all these organizations, but you also have to have 218 votes and 51, really more like 60, in the Senate.

NORQUIST: Our job, our task is to have the successes on spending that we've had on taxes, and we're not there yet.

Presidents get to do like two or three big things -- you know, Reagan came in and said, "I've got these three projects." Bush came in with, you know, "We're going to have tax cuts. We're going to have Social Security reform, national missile defense, now the war on terrorism."

And the president can sort of focus on two, three, maybe four big things. Winning -- part of whether we're winning or not will be whether this president and subsequent presidents include spending restraint, spending reductions as one of the big three or four.

And I don't think we're there yet other than that we do get presidents to say it. I mean, it was on Reagan's list of things to do, but it was sort of the part of the checklist that, you know, destroy Soviet Union, cut taxes, you know, deregulate, reduce spending. We didn't get to the reduced spending part.

I talked about the models that we have at the state level, and I think those are very helpful. Both the bad examples like California -- don't do that. You know, your parents would tell you about the kid down the street, don't behave like him, he's bad.

OK, California, don't behave like them, they're bad -- the government spending there.

And when we do have some good examples at the state level. In Washington, we actually have some good examples that we can point to. And I would actually argue that the Defense Department under Rumsfeld -- Secretary Rumsfeld came to Washington and his goal was to transform the military, stop doing some of the stuff we were doing, stop spending some of the money we were spending on various weapon systems that were fine for stopping the Soviets in Germany, but not particularly useful for present tasks, and spend less money but move it into other areas.

Reduce the total size of the military and make it more effective, and I think we've seen in the middle of the war on Afghanistan and Iraq serious efforts to canceling of the Crusader missile, the base closings bill that should lead to a quarter of overseas bases being closed, a quarter of domestic military bases being closed -- tremendous savings for taxpayers that can be brought to reducing the total spending and tax burden, or some of them use to spend necessary defense spending on new weapons systems or new ideas.

So there you have in the part of the government that's actually in the Constitution and that actually should exist the government being somewhat serious about reining in spending and setting up priorities at a time when it would be very easy for Rumsfeld to say, "You know, I had these plans to rethink civil service laws and to try and get more flexibility and competitive sourcing for the military, but -- and base closings and closing down, but I've got to focus on this war and so I'm not going to do this other stuff."

That would be very easy to do and it would be awfully tough for us to be overly critical of a guy, you know, who's waist deep with alligators saying, "How come you're not doing three things, too?"

He didn't take that approach.

Well, what about those people who run departments that aren't involved in wars at present, you know, over at HHS and over at EPA and over at Transportation and Treasury and so on? Those guys are not in the middle of a war. They ought to be as transformational and as rooting out unnecessary spending as the Pentagon is in the middle of a war.

So, yes, there are some good examples even in the Washington bureaucracy -- we need more.

QUESTION: I was just looking at the chart of regulatory burden in your report and I noticed that from 1993 to 2001 -- this might be a better question for Dan -- from 1993 to 2001 it fell every year.

You mentioned earlier -- you praised President Reagan for the work that he did cutting the regulatory burden.

Looking at this chart, I see that from 2001-2002 and 2003 it's grown quite exponentially. Do you think that the current administration bears some of the -- or should bear some of the criticism for the increased costs of federal regulation over the last three years?

CLIFTON (?): Let me tell you what that is.

That's the combined federal and state regulatory burden, but their federal regulations have increased three years in a row. Most of that increase or a good portion of it is the tax compliance, which Scott Hodge had spoke about.

CLIFTON (?): It's continually getting more and more complex.

In addition to that, Sarbanes-Oxley was an enormous regulatory cost that was almost an inevitable train wreck waiting to happen. You had private companies, basically engaging in fraud of investors, and Congress, in a knee-jerk reaction way, went and issued all these new regulations.

And the recent press reports indicate that companies are now switching from being public companies to private companies to avoid the regulatory burden. And that's one of those things where it just came and it happened. We tried it. And we'll fix it. We're going to go back and fix it.

In addition, at the state level, states have been increasing regulations because they're having a little bit of trouble raising all the taxes they want. So they're nickel and diming through fines and regulatory fees. And really that's in general what the main drivers of the regulatory burden has been over the last three years.

QUESTION: So you would say no then?

CLIFTON (?): Look, I say that we're not doing a good job paying attention to the regulations and that we need to come out and show this hidden cost. Nobody sees regulations. But everybody in Washington and state capitals have increased regulations and everybody should take equal responsibility.

QUESTION: (OFF-MIKE)

CLIFTON (?): The report is on our Web site, www.atr.org <http://www.atr.org> .

NORQUIST: Do take a look at the at the entire study. We do this each year, atr.org.

I would be interested in looking at which departments are most responsible for those regulations that are coming out. The good example that I would point to, and obviously there are bad examples because the regulatory burden continues to grow, is over at the Labor Department where Elaine Chao has put forward a series of new regulations that are replacing stuff from the 1930s that makes no sense now. So there are actually much less intrusive regulatory burdens on workers and businesses.

We have regulations on the books about the guys who put bowling ball pins back in, and all sorts of rules for how you pay them and how you treat them and how long they can work and how old they have to be and so on.

That job doesn't really exist anymore. And the whole department is filled with stuff like that. And Elaine Chao is going through and modernizing it in a way that makes it less intrusive and less costly.

That said, I want to thank the experts for joining us today from all the various groups, foundations and think tanks and activist groups. I appreciate all of you joining us today.

Today, again, is "cost of government day." We all work until today to pay the cost of government spending and government regulations. As the chart shows, it was getting better. It's heading in the wrong direction now. And we need to focus on the total cost of government, not just taxes, but spending and the regulatory burden.

Thank you for joining us.

END

NOTES:
[????] - Indicates Speaker Unknown
[--] - Indicates could not make out what was being said.[off mike] - Indicates could not make out what was being said.

PERSON: KEVIN BRADY (92%); GROVER NORQUIST (76%); DAN CLIFTON (60%);