The Government has introduced a TABOR Bill to Parliament. TABOR is an acronym for “Taxpayers’ Bill of Rights”. But rather than have anything to do with a real Bill of Rights, TABOR is actually a wacky libertarian measure designed to shrink the state and inhibit its ability to protect the vulnerable or respond adequately to economic circumstances.
The essence of Rodney Hide’s Spending Cap (People’s Veto) Bill is to cap public spending at a calculated level, with increases in subsequent years’ public spending taking into account only inflation and population growth. If a subsequent Government wanted to increase public spending by more than inflation and population growth, it would have to put the proposal to a referendum.
This Bill is as wrong as legislation can get. For a start, it is constitutionally repugnant. It would undermine the sovereignty of Parliament by constraining the Budget measures future Parliaments can pass.
From a practical point of view, it locks in the neo-liberal mantra of constraining Government expenditure during economic recession – a policy that failed in the 1990s and is failing again now. And while governments could still run surpluses and save during the economic good times, there would be little point in doing so because they could not spend those savings to stimulate the economy when it heads south.
The US state of Colorado introduced TABOR in 1992. An analysis by Iris J Lav and Erica Williams of the Center on Budget and Policy Priorities shows that in Colorado:
- TABOR has contributed to declines in Colorado education funding
- TABOR has played a major role in the significant cuts made in higher education funding
- TABOR has led to drops in funding for Public Health programs
- TABOR has hindered Colorado’s ability to address the lack of medical insurance coverage for many children and adults
- TABOR’s interaction with other areas of the state’s budget has created additional problems. Spending for corrections, for example, has grown substantially faster than the inflation-plus-population formula of TABOR, in part due to strict criminal codes and sentencing laws. Because spending for corrections has grown rapidly, other areas of the budget have been squeezed even more in order to keep overall spending under the strict TABOR limit.
Treasury does not support Hide’s Bill, concluding in its Regulatory Impact Statement (PDF):
The Treasury does not support imposing constraints on the ability of the government to set fiscal strategy via hard parameters in legislation. A legislated spending rule, which a government did not wish to be bound by, could lead to efforts to circumvent the rule – potentially favouring certain types of decisions (e.g. tax expenditures or regulatory changes) and raising the risk of unintended or perverse outcomes.
My hope is that constitutional and economic wisdom will prevail and the National Party will abandon their support for the TABOR Bill. My fear is that this Bill will carry over after the election, and if National and ACT together have the numbers to govern, this is the sort of idiotic voodoo-economic measure Don Brash just might make a bottom line in negotiations to form a government.