University of Virginia Legal Working Paper Series
University of Virginia Public Law and Legal Theory Working Paper Series
Temporary-Effect Legislation, Political Accountability, and Fiscal Restraint
Abstract
The proper duration of legislation has become highly controversial as a result of the enactment of many temporary tax laws during the George W. Bush Administration. The prevailing view is that inclusion of an expiration date or “sunset” feature in legislation permits the cost of the legislation to be misrepresented and allows its proponents to escape the discipline intended by the Congressional budget process. Under this view, fiscal discipline is preserved through enactment of so-called “permanent” legislation, which is accounted for correctly.
This article challenges that view and shows that, barring estimation error, legislation with a sunset feature, which is referred to generally as “temporary-effect” legislation in the article, is accounted for accurately in the legislative process, whereas permanent legislation is not. Consequently, enactment of temporary-effect rather than permanent legislation would increase political accountability and may result in greater fiscal restraint. In addition, when temporary-effect legislation expires, the cost of any extension is fully taken into account in the legislative process. The cost, therefore, competes with, and potentially crowds out, the cost of other legislation. By contrast, the cost of continuing a permanent program disappears in the legislative process and therefore produces little or no crowding-out effect. These features of the legislative process may help to explain why discretionary spending programs, which are generally enacted as temporary-effect legislation, have grown much more slowly than either mandatory entitlement programs or tax expenditures, both of which are generally enacted as permanent legislation.
The article also addresses a number of other issues raised by a preference in favor of temporary-effect legislation. Among other things, the discussion questions the validity of common perceptions that an increase in temporary-effect legislation would (1) lead to more spending increases and tax cuts, (2) be unnecessary so long as other budget-control tools, including a rule known as “pay-as-you-go” or “PAYGO,” are tightly enforced, (3) increase legislative transaction costs such as campaign contributions and lobbying costs, and (4) have a detrimental effect on long-term investment incentives. The topic of the article is timely as Congress will soon have to decide the duration of spending and tax initiatives of the new Administration as well as many expiring tax laws.
Subject Area
Law and Economics, Legislation, Politics, Public Law and Legal Theory, Taxation
Recommended Citation
George K. Yin,
"Temporary-Effect Legislation, Political Accountability, and Fiscal Restraint"
(August 2008).
University of Virginia Legal Working Paper Series.
University of Virginia Public Law and Legal Theory Working Paper Series.
Working Paper 96.
http://law.bepress.com/uvalwps/uva_publiclaw/art96
No readers' reactions have been posted for this article. To submit one, copy the URL for this article (http://law.bepress.com/uvalwps/uva_publiclaw/art96) and click here.