This week the American Enterprise Institute released a report by economist Benjamin Zycher analyzing the impact of state-level Tax and Expenditure Limitations (TELs) on government growth. Analyzing fiscal data from a range of states, Zycher concludes that TELs are largely ineffective. He argues that the presence of a TEL does not change the underlying public demand for government services. Similarly TELs do not stop rent seeking, interest-group demands, or other activities that lead to expanding government.
Zycher’s data collection is thorough and his analysis is methodologically rigorous. His study is consistent with a body of academic research which has found that revenue and spending limits are an ineffective tool for limiting the growth of government. The reasons he present explain part of this. However, Zycher spends little time considering the incentives of those drafting TELs. Many TELs are largely symbolic measures enacted by state legislatures. These TELs allow legislators to publicly take a position in favor of smaller government. However, they contain loopholes that give legislators the freedom to avoid cutting popular programs.
Government grows, and the best of intentions aren't enoubh to limit it. Ronald Reagan did a lot to change the coversation about government in this country, but the bureaucracy didn't exactly get smaller during his administration.
As the piece notes, these initiatives can't change the underlying demand for government services, which, after all, is what drives the growth. That's why one encouraging sign is that Tax and Expenditure Legislatoon that originates with taxpayer groups rather than legislatures have a better chance of bringing a modest slowdown.
