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DOGE can learn from North Carolina
- Details
- Tuesday, 26 November 2024
- Written by John Hood
President-elect Donald Trump has tapped business leaders Elon Musk and Vivek Ramaswamy to head up the Department of Government Efficiency, an initiative that isn’t really a department but could do some good — as long as its leaders carefully study past efforts at reform.
I don’t just mean federal efforts such as the moderately successful Greenspan Commission on Social Security and the largely unsuccessful Grace Commission, both created in the early 1980s at the behest of President Ronald Reagan. Some states have achieved big regulatory and budget reforms, including our own.
In 2009, state General Fund spending accounted for 6.2% of North Carolina’s gross domestic product. This year, it’s 4.5%. If policymakers in Washington could manage the same percentage-point change in federal spending as a share of GDP, that would slash annual deficits by more than a quarter, or about $450 billion a year.
It wouldn’t happen overnight, however. While some of North Carolina’s budget restraint occurred during a fiscal crisis precipitated by the Great Recession of 2008-10 — when Democrats, not Republicans, ran the General Assembly — most occurred over the next dozen years, with GOP majorities in both chambers.
Conservative leaders didn’t stomp in with reckless abandon, whacking state programs and laying off large swaths of public employees. Instead, they employed formulas and targets. They capped annual spending growth at the combined rate of inflation and population growth. Within that cap, they raised spending on high-priority programs and offset that with savings elsewhere.
Furthermore, when state lawmakers began large-scale tax reform in 2013, they phased in rate reductions over time, using “fiscal triggers” to ensure that tax revenues kept growing at a sufficient rate to fund core public services.
And when they began thinning the state’s regulatory thicket, they did so in stages, in a series of annual reform bills, rather than attempting some sort of comprehensive package in one fell swoop.
In other words, North Carolina’s fiscal and regulatory reformers played the tortoise, not the hare.
Does that strategy sound too timid, or at least too boring, for the likes of Musk and Ramaswamy? Perhaps it is, but history suggests that it’s the only approach likely to accomplish lasting results.
There’s no shortage of good ideas for reforming federal regulation and shrinking the federal deficit. Plenty of experts inside and outside government, from members and staffers on Capitol Hill to fiscal analysts with vast experience in the U.S. Office of Management and Budget or other agencies, have assembled long lists of actionable ideas — and are currently sharing them with the leaders and soon-to-be staffers of DOGE.
What disappointing efforts such as the Grace Commission and the 2010 National Commission on Fiscal Responsibility and Reform (co-chaired by North Carolinian Erskine Bowles) lacked was a realistic strategy for translating ideas into policy.
No wasteful program exists by accident. Some interest group lobbied for it, and will lobby vociferously to protect it.
Musk and Ramaswamy predict that many of their ideas can be implemented through executive action, without a vote of Congress. That’s possible — but it’s not really where the fiscal action is. For example, while downsizing the federal workforce may be a good idea, the federal payroll represents only about 4.3% of federal spending.
The vast majority of federal expenditures consists of interest payments, national defense, and transfer programs such as Social Security, Medicare, and Medicaid. The first category is inescapable and the second rising in priority as the world gets increasingly dangerous.
Campaign rhetoric aside, there’s really no way to shrink federal deficits by a noticeable amount without taking on the entitlement state.
Which brings us back to formulas and triggers. No serious person, not a single one, favors immediate, large-scale cuts in such programs. The only viable strategy is precisely the one that, in a different context, North Carolina pursued: phasing in reforms over time, giving affected parties time to plan and adjust.
Easier said than done — but it can be done, as our own case demonstrates.
Editor’s note: John Hood is a John Locke Foundation board member. His latest books, Mountain Folk and Forest Folk, combine epic fantasy with early American history (FolkloreCycle.com).
(Photo: The North Carolina capitol building in Raleigh. Photo courtesy of Wikipedia)
