The Problem With Spending Caps

The supposed purpose of a spending cap is to prevent the government from increasing spending (or, presumably, cutting taxes) during times of high tax revenue, on the assumption that such actions will lead to larger deficits and tax increases (or, presumably spending cuts) during bad times. This is, perhaps, a sensible goal. However, there are better methods to dampen the effect of economic downturns on the state budget (notably, by shifting toward property taxes and away from income and sales taxes).

The real effect of a spending cap is to remove flexibility from policy making. Even if the cap accounts for inflation and population growth, it only really allows the legislature to fund existing programs. Any new program or an expansion of any existing program would need to come at the cost of another existing program. New taxes could not be levied to fund an immediately new program, although since the cap is based on some calculation from the previous decade’s tax revenues, the higher taxes may, over time, allow for more spending. But even then, that adds a decade’s lag for the adoption of new policy, an unacceptably long wait.

More importantly, the cap will ignore significant other constraints on the budget. It will ignore the aging population and the corresponding strain on state health services. Additionally, health care costs have been rising significantly faster than inflation and income, again increasing the demand for and cost of state services. I don’t think it is much of a reach to suggest that even if no new programs were adopted, and the prison population remained the same, that the cost of running existing programs would still increase faster than inflation and population growth over the next 20 years. Ergo, a spending cap doesn’t prevent new spending, but locks us into future spending cuts as program costs rise in unpredictable ways.

Furthermore, spending caps are anti-democratic (small ‘d’), in that they prevent new spending desired by a majority of the public. However much Republicans may like to pretend, spending generally isn’t forced on an unwilling population by out of control legislators. Spending is something the public generally wants, and if it doesn’t, then it can replace the legislators and end the programs. Spending caps don’t have brains. They do not think or reason. They do not recognize that there was a natural disaster or that the public wants expanded arts education for their children or that massive water infrastructure spending is necessary to prevent the Central Valley from turning into a dust bowl. If we want a government by algorithm, let us replace the legislature with a computer and be done with it. Of course, the result will be that the computer says “no”.


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  1. […] is a little baffling. With regards to Proposition 1A, they see the problem (one I have called government by algorithm) and then draw a truly strange conclusion: The reserve fund is closely linked to the spending cap, […]

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