Fiscal Candor

A new report tells governments something they need to know--but would rather not hear.
September 2006
By Jonathan Walters  |  Senior Editor
A Senior Editor of Governing, Jonathan has been covering state and local public policy and administration for more than 30 years.

When it comes to tilting at windmills, you've got to hand it to the National Academy of Public Administration, a rabbit warren of policy wonks that still clings tenaciously to the notion that complex issues of long-range importance to our country deserve serious analysis, debate and discussion.

NAPA's latest effort actually manages to tilt at two windmills at once: It explores the intergovernmental implications of long-range tax policy. If there's one subject the political leadership of this country likes discussing less than long-range tax policy, it's the intergovernmental implications of anything.

But NAPA has taken on the challenge in a just-released report based on the proceedings from a one-day forum that brought together a broad range of scholars and practitioners to discuss the importance of coordinating long-range revenue policies among and between layers of government.

Among the assembled were G. William Hoagland, top adviser to Senate Majority Leader Bill Frist; Katherine Baicker, of the President's Council of Economic Advisers; Mick Cornett, the mayor of Oklahoma City; and Jay Rising, the Michigan state treasurer. Hoagland offered one of the more intriguing proposals of the day: He suggested that the President should regularly include in his budget a statement on its intergovernmental fiscal impacts.

The group managed to lay out a pretty convincing case for why we ought to attempt a more sophisticated approach to long-range tax policy. It came to an agreement that we all should be worried about the long range fiscal health of the United States, and that no single layer of government is going to be able to deal with all the taxation and spending challenges.

About the only time Congress gets close to introspection on these subjects is when it tries to preempt state and local powers to collect taxes across state lines. It did that in a piece of legislation considered this spring, one that, if enacted, could cost state and local governments $1 billion in the first year and $3 billion per year by 2011. It's just the sort of blunt-instrument answer to complicated fiscal questions that the NAPA report warns against trying.

Rather than play preemption games, the NAPA panel concluded, legislators at all levels of government need to be thinking about such factors as the shifting political and economic climate across the globe; the aging U.S. population (and the health care cost implications thereof); our aging infrastructure; a ballooning federal debt; and rapidly rising public pension obligations at the state and local level.

The good news about the NAPA forum and the resulting report is that a group of such ideological and professional diversity managed to reach a fair amount of consensus in just one day of deliberation. The bad news is that it's not likely to happen again; NAPA doesn't have the resources to continue such quixotic enterprises on anything like an ongoing basis. And the report makes for such sobering--even depressing--reading that it's unlikely to get much circulation outside a dwindling handful of hard-core intergovernmental specialists.

So very few citizens, even those who try to keep themselves informed on fiscal questions, are likely ever to come upon the warning of the NAPA forum that "fragmented and inconsistent tax systems among the states or even nations will increasingly serve to undermine economic productivity and growth." Or the idea that to get back to real fiscal health--and to maintain it--will require tax-policy revisions on a "whole of government basis," involving "a need to recast and update tax systems at all levels of government to be better aligned with trends in a rapidly globalizing and changing economy."

In the end, there's little reason to think that the eminently sensible NAPA recommendations will become part of the national political discussion anytime soon. Still, it would be nice to figure out a way to hammer home such a message with some kind of consistency. The mere fact that NAPA was able to generate a reasonable amount of unity among a group of high-level federal, state and local officials-- even for just one day--makes it an exercise that would be well worth repeating.