Amity Shlaes has an intriguing column up on the Bloomberg wire urging Republicans to back the idea of "sunsetting" -- either limiting the life of federal programs or giving them a regular review. She reports that Senator Thune of South Dakota is "sponsoring legislation that would establish a one-year timeframe to end government ownership of private entities acquired under the Troubled Asset Relief Program and block further acquisitions." And she says "John Chachas, a Republican who is running for Senate Majority Leader Harry Reid's seat, argues that 'the federal government should accelerate its exit of ownership of banks, insurers and car companies and reveal its plan to accomplish this by the end of 2010.'"
Sunsetting sounds good when it is applied to government programs that free-market types dislike, such as TARP. But it can be less appealing when it applies to laws such as the estate tax repeal or the Bush tax cuts, or, for that matter, local laws such as the one in New York State that gave the mayor of New York City control of the city's public schools. The sunset allows all the interest groups a chance to extract a new round of concessions in exchange for renewal of something akin to the status quo. More importantly, it's more difficult for private-sector actors to make decisions if there is increased uncertainty about future regulation or or tax law. How would a person calculate about how to save for retirement if Social Security and the IRA and 401K laws were all subject to sunset provisions every five years? At a moment when people are concerned that businesses are prioritizing short-term profits over long-term growth, sunsetting would make it more difficult for firms and individuals to plan for the future. How would foreign countries treat our friendship commitments if they know that our alliances were subject to sunset? How much pressure would there be to sell off national parks if it became clear that our commitment to preserve them were subject to periodic review? How much more important would lobbyists be, and how much more would be spent on them, in a system in which the entire tax code were formally up for review every year or two or five? How would the possibility that the FDIC would sunset affect people's willingness to deposit in banks? How will the farmer decide what to plant if he knows that his crop subsidies are going to sunset.
Amity is a genius and a friend, so my point here isn't to argue with her. She's got a scoop. The sunsetting idea is newsworthy. Worthless government programs and departments eventually deserve to be shut down, and without express sunset provisions, inertia seems to prevent that from happening. But if the goal is to promote growth, there's a value to be placed on certain, predictable government policies over the long-term. That way individuals can make their decisions on the substantive merits rather than gambling on the political chances that some tax or program is going to get renewed or expire in Washington.