Parliaments worldwide neglect their duty to maintain fiscal discipline

The January 2018 government shutdown in Washington has been triggered for purely political aims by the U.S. Congress. Abuses of budgetary governance systems have become common in the West, facilitating dangerous overspending.

A European government shutdown poster government shutdown Washington
In theory at least, a government shutdown mechanism patterned on the U.S. Antideficiency Act could prove healthy for some European states as well. © dpa

In a nutshell

  • Federal government shutdown, an essential budgetary safety fuse in the U.S. governance system, is being misused
  • Also in Europe, budgetary process is overly politicized to the detriment of taxpayers
  • An important restraint on EU spending is about to be weakened

Under the Antideficiency Act of 1884, the federal government of the United States may incur obligations or make expenditures authorized by appropriations. When budgetary limits are exceeded, new funds can only be provided by an act of Congress.

When no agreement on new appropriations is reached between Congress and the White House, the government must stop all so-called “nonessential” expenditure and furlough federal staff. This is called a “government shutdown.”

This mechanism provides a necessary disciplinary check on overspending. In theory, it could prove healthy for some European states as well. It should be resorted to sparingly, however, and only under exceptional circumstances. Unfortunately, the act kicked in more frequently of late and under the administration of Barrack Obama. And last week, one year into President Donald Trump’s term, there was another shutdown.

Interestingly, Congress did not block the funds for fiscal or budgetary reasons, as would have been legitimate. It was a tactical ploy. Congressional Democrats set a political condition, demanding that the White House alter its immigration policy, Mr. Trump refused to budge. In this case, the “gambler” was not the president, but Congress.

Essential safety fuse

The Antideficiency Act, an essential safety fuse in the U.S. governance system, is being used in a political poker game. This incident reveals an alarming shortage of budgetary and fiscal prudence on the side of the lawmakers.

One of the key tasks of any parliament, not just the U.S. Congress, is to enforce discipline in government spending. Legislatures in the Western world, however, are usually controlled by parties that also compose the governments. Their function of controlling how citizens’ money is spent is jeopardized when the budgetary process becomes overly politicized. Examples of such parliamentary malfunction can be found in many European countries.

I am afraid that not even a shutdown mechanism modeled on the U.S. act would address the overspending problem in our continent, because parliaments would most likely align with government policies. Their role as long-term protectors of fundamental interests of the state and its people is frustrated by this conflict of interest. This is exacerbated by the fact that parliamentarians today depend on politics as a career. Like a cancer, it gradually destroys democracy and freedom.

The lesson of the sovereign debt crisis is being ignored. Austerity has been abandoned. Government spending is increasing again in many European countries and new debt is accumulating – the process being facilitated by the excessive money supply policy of the European Central Bank. The European Commission has set a bad example of substantially increasing its outlays even as the European Union faces the approaching loss of financial contributions from the United Kingdom. This revenue shortfall alone should trigger a shutdown and immediate cost-cutting measures.

An important disciplinary restraint on EU spending has been the rule that the commission is not allowed to levy taxes directly.

Now, the prospect of a deficit, not only Brexit related, is being used cynically in Brussels to argue for abandoning that safeguard and letting the commission impose direct taxes. Ecology is the hypocritical pretext for establishing a European tax on plastic, which would set a new precedent and open the floodgates for more levies. I have not heard any protest from the European Parliament against this shameless scheme.

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