In Shadow Market: Money management by the masses, we discussed the idea of distributing the management of a mutual fund to consumer traders. The popularity of this post got me thinking, “can we help the U.S. Congress do a better job managing tax revenue?”
Town Hall: Providing unsolicited “guidance” to our elected representatives.
1. Start with the 2007 US buget as our “stram-man.”
Build a taxonomy of every policy issue based on the US budget. Allow anyone to navigate the budget from top to bottom or from bottom to top.
2. Give every voter her “fair share” of budget dollars to allocate.
Take the entire U.S. budget and divide by registered voters.
Each voter gets to allocate his share of the US budget as she sees fit. We will develop an algorithm that uses the votes to date as a sample for the overall population. In addition to all existing line items, “give me back my money” will be an available option. At any point in time, votes can see how the “crowd” would allocate the US budget versus how our government is actually spending our money.
3. Develop discussion forum around on every line item.
This could become the basis of a Politics portal and could really change the way the government spends our money. And I’m sure that we could do a better job of managing our money than our representatives. If the Founders had the internet in 1776, this is the way they would have wanted it 
9 Comments
June 13, 2008 at 5:04 am
How about giving proportional ‘votes’ based on the taxes you paid divided by total personal income tax revenue, instead?!
It would help if we could even do something trivial like requiring the hired help (i.e. elected representatives) to spend a couple of days playing SimCity. Players in that game quickly realize that borrowing money is extremely painful and raising taxes and fees does not always generate more revenue…
June 13, 2008 at 7:28 am
I’m a huge fan of this type of idea, which I have been interested in working on for a long time. I have described it as “participatory taxation”, and I think you’re absolutely right that it could fundamentally change how our government allocates money. I also believe it could fundamentally change the American’s people perspective on taxes as well.
Of course, I had always imagined a scenario where we put real skin into the game by getting legislation passed which would allow citizens to allocate their share of 1% of the federal budget (and there is an interesting debate to be had over whether that share should be equally divided among citizens or based on how much they pay in taxes), with the money coming from a 1% cut in the budgets of every federal agency.
Think 1% is a number that is both low enough to not dramatically effect any existing agency but big enough in absolute terms ($25 billion) to actually get people excited about participating (though “give me back my money” would not be an option in this program). And I do think the results of such a program would have a profound impact on future budgets far beyond the 1% that people would actually be allocating.
Of course, there are huge political challenges to ever getting something like this passed, and I think your idea could be a great first step to get the ball rolling. The key will be to figure out a way to get more people than the political junkies participating, at a time when the program is still just virtual.
June 13, 2008 at 3:17 pm
P.S. But as much as I love the idea, I gotta disagree about the Founders approving. They were definitely believers in representative government over democractic government. Didn’t even want ordinary folk voting directly for the President or the Senate, much less making budgets.
June 13, 2008 at 4:51 pm
I’ve been a huge fan of discretionary taxes for a while.
I think a lot of people are disillusioned with politics because they feel their vote and tax dollars are wasted. As Gordon notes, even 1% control could get people re-engaged, create a feeling of “Okay, at least this part matters.”
I think the “give me my money back” is key, creating pressure on the gov’t to justify why it is better at spending our resources than we are.
For this idea to be effective, I think tools to report these suggestions to Congress in aggregate and in personal letters would help.
I’d love to see discretionary taxes implemented on a local scale to see if it works, then lobby for larger scale if it does. Perhaps sites like this could further that.
June 13, 2008 at 5:30 pm
How about a set of boxes on your 1040 form that directs a percentage of your taxes to one of an option list of expenditure categories? People who don’t check any boxes leaves it up to the discretion of Congress.
Or, allow dollar-for-dollar “tax-credit” contributions to government! Every dollar you send to a federal agency reduces your tax liability by a dollar. Let the agencies “win” your business!
June 13, 2008 at 9:16 pm
Think you’re both on the right track Mark and Jolly. Testing in at least one state or city probably makes sense before going federal. And actually allocating the resources on your 1040 is what I had always imagined as well.
I had envisioned that folks would get to allocate to a limited set of buckets (e.g. defense, education, foreign aid, housing, etc.) with each department making a case for what they would do with various levels of money.
But I really don’t think allowing people to take it back is workable, since there is a massive free rider problem that will cause everyone to vote to take it back. $100 is nothing in the grand scheme of things to the Fed, but it’s meaningful to me.
I’m someone who believes we’re undertaxed as a nation, but I would certainly take my money back as well if given the option. I’m only willing to pay more if everyone else is expected to as well.
That said, I do think debt reduction should be an options, which in essence puts the money toward lower taxes. It’s just lower taxes for everyone long term rather than lower taxes for you right away.
June 14, 2008 at 7:37 am
The idea of a system of budgetary “guidance” rather than binding budget decisions by voters is really attractive.
It would be interesting to see how these budgetary allocations, driven by voters, would align with the original intent of our federal government - providing for the common defense, promoting the general welfare, and securing the blessings of liberty.
Will individuals sufficiently fund defense, interstate commerce, and general government? Will money shift from budgets where the day to day benefits are less tangible to the average voter (space exploration, international affairs, or general government) and to items like education or health care?
I see no downside to the “guidance” experiment. It will certainly exacerbate tension between interest groups as we debate the allocation of budget dollars between health, medicare, social security, regional development, and agriculture. But this tension will be healthy if it helps us sharpen these debates about whether government should be involved, to what extent, and whether it is doing so efficiently.
I’d like to see these populist concepts applied more broadly to both guiding and holding accountable our elected officials. Let the congress set a legislative agenda and let the voters vote on proposed legislation. Elected officials have the final say, but they ignore populist sentiment at their own peril. At the end of the day, we’d all be able to see the record of how our representative aligned with our guidance and at election time, weigh this information as we cast our vote.
One final thought. Even if this system was not applied to populist budgetary guidance, it would be great if our elected representatives used such a system. It would drive greater transparency in government when we could look at the detailed budget decisions made by each of our representatives.
As a sidenote, check out the 2009 budget summary at http://origin.www.gpoaccess.gov/usbudget/fy09/pdf/hist.pdf. We are spending 17% on defense and 70% on human resources (social security, medicare, etc.). Everything else is small by comparison. One look at this budget tells me that the debate is really not over individual line items within the budget. The debate is really over the business of government. Should the government be in the business of retirement income assurance or the provision of universal health care?
June 22, 2008 at 4:48 am
I’m not sure I agree that the Founders would have been in favor of a more direct form of democracy. You should read Richard Posner’s Law, Pragmatism & Democracy and see how he connects Schumpeter’s ideas of creative destruction up with political evolution.
In particular, as evidenced by Federalist 10, Madison believed in divisions of labor between political leaders and the population at large. There is a specialized set of skills that goes along with solving difficult, multilateral negotiations. It involves pragmatism and non-ideological compromise, something that we may or may not want most people to get good at.
Another way to view the problem is from the point of view of opportunity costs. Would we really be better off if everybody had to devote time to politics? I don’t think so. I think that the result would be that people who knew the most about a particular issue would have LESS say about it, because they would be busy doing whatever it is that is productive in the market relevant to that issue.
The root problem is not that there is not enough information available to politicians about what their constituents want. They generally know what their constituents want. The problem is that they are too beholden the relatively invisible minorities that fund their campaigns.
In other words, a better way to improve political decisionmaking isn’t to increase the size of the group of decisionmakers, but rather to increase the transparency into the influences on the existing group of decisionmakers, bearing in mind that we don’t want to strictly hold any particular decisionmaker to her promises, because non-ideological compromises are necessary for reaching complex multilateral agreements.
June 24, 2008 at 5:37 pm
Great idea Mike, now let’s pair it with execution. This type of portal would get huge traffic and probably be very monetizeable.
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