Chalk up another victory – at least on the rhetorical level – for the Tea Party.

President Obama will release his fiscal year 2012 budget Monday and he’s apparently become a born-again fiscal conservative. Here are some excerpts from a Washington Post story.

President Obama will respond to a Republican push for a drastic reduction in government spending by proposing sharp cuts of his own in a fiscal 2012 budget blueprint that aims to trim record federal deficits by $1.1 trillion over the next decade. …two-thirds of the savings would come from spending cuts that are draconian by Democratic standards… When it lands Monday on Capitol Hill, Obama’s plan will launch a bidding war with Republicans over how deeply and swiftly to cut, as the two parties seek a path to fiscal stability for a nation awash in red ink.

I’m skeptical of battlefield conversions, particularly when politicians utilize the dishonest Washington definition of a budget cut – increasing spending by less than previously planned. So the first thing I’ll do when the budget is released Monday is to visit the Historical Tables of the Budget website and see what spending is projected to be in 2011 and what Obama is asking for in 2012.

Those numbers probably won’t be accurate since the Obama Administration (like previous ones) will use best-case assumptions, but at least we’ll get a sense of whether:

a) spending actually is being cut (I’m not holding my breath for this miracle), or

b) spending is frozen at current levels (this approach would balance the budget by 2017, but it’s almost as unlikely at the first option), or

c) spending is being restrained (perhaps 2 percent growth, enough to keep pace with inflation), or

d) spending is growing far too fast (say 4 percent growth, pushing America quickly in the wrong direction), or

e) spending is continuing to explode (5 percent growth, 6 percent growth, or even more, meaning we’ll be Greece sooner than we think).

My guess, for what it’s worth, is that the Obama Administration will claim (d) but will actually be proposing (e) if more realistic assumptions are used.

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Texas Senator Dan Patrick has just filed Senate Bill 126, which would require law enforcement officials to check legal documentation of lawfully stopped individuals. Other states will likely follow suit.

Let me confess how this immigration business is especially poignant to me. I teach college students and have every ethnic persuasion imaginable in my class. If S. B. 126 becomes law, I will turn to my black students and say, “If a cop stops you, you will not have to carry papers to prove you’re legal.” I will turn to my Asian students and say, “If a cop stops you, you will not have to carry papers to prove you’re legal.” I will turn to my western European students and say, “If a cop stops you, you will not have to carry papers to prove you’re legal.” But if I turn to Yolanda Garcia (pseudonym), who is legal and came from Spain three years ago, I will have to say to her, “If a cop stops you, you will have to have papers to prove you’re not illegal, or otherwise be fined, if not jailed.”

A New Yorker cartoon depicts this prejudice accurately. It shows a police officer putting a handcuffed man into a police car, warning, “Anything you say with an accent may be used against you.” S. B. 126 will come to this.

There is something downright sick in this prejudicial treatment. Conservatives and libertarians usually champion the supremacy of the individual over the collective. We judge individuals as individuals, not as members of a group. But too many conservatives are now demanding that we prejudicially judge people as members of a group. They have become the collectivists that they supposedly reject.

The Constitution will not help their case. The Framers designed it to protect, more than anything else, the freedom of the individual.

It gets even worse.

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I”m biased, of course, but I’m very proud of the Cato Institute for its principled defense of individual liberty and limited government. Cato stood up against the so-called stimulus when others were quiet. Cato was against Obamacare, even back when it was called Romneycare. Now, we’re leading the fight on restraining Leviathan. The image below is our new full page ad on cutting wasteful programs, agencies, and departments – and asking Obama to fulfill his promise on reducing needless spending. Click here for a full-size version. And check out the Downsizing Government website put together by my colleague Chris Edwards.

The case for limited government is growing stronger each day. A Harvard economics professor just published a column about his research about the pro-growth benefits of spending cuts. Another column compared today’s anemic expansion with the strong growth under Reagan. And another economist recently reviewed America’s long-run fiscal danger caused by entitlement programs.

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David Ranson had a good column earlier this week in the Wall Street Journal explaining that federal tax revenues historically have hovered around 19 percent of gross domestic product, regardless whether tax rates are high or low.

One reason for this relationship, as he explains, is that the Laffer Curve is a real-world constraint on class warfare tax policy. When politicians boost tax rates, that motivates taxpayers to earn and/or report less income to the IRS:

The feds assume a relationship between the economy and tax revenue that is divorced from reality. Six decades of history have established one far-reaching fact that needs to be built into fiscal calculations: Increases in federal tax rates, particularly if targeted at the higher brackets, produce no additional revenue. For politicians this is truly an inconvenient truth. …tax revenue has grown over the past eight decades along with the size of the economy. It illustrates the empirical relationship first introduced on this page 20 years ago by the Hoover Institution’s W. Kurt Hauser—a close proportionality between revenue and GDP since World War II, despite big changes in marginal tax rates in both directions. “Hauser’s Law,” as I call this formula, reveals a kind of capacity ceiling for federal tax receipts at about 19% of GDP. …he tax base is not something that the government can kick around at will. It represents a living economic system that makes its own collective choices. In a tax code of 70,000 pages there are innumerable ways for high-income earners to seek out and use ambiguities and loopholes. The more they are incentivized to make an effort to game the system, the less the federal government will get to collect.

Several people have asked my opinion about the piece. I like the column, of course, but I’m not nearly so optimistic that 19 percent of GDP represents some sort of limit on the federal government’s taxing power. There are many nations in Europe with tax burdens closer to 50 percent, for instance, so governments obviously have figured how to extract much higher shares of national output. Part of the difference is because America has a federal system, and state and local governments collect taxes of about 10 percent of GDP. That still leaves a significant gap in total tax collections, though, so the real question is why American politicians are not as proficient as their European cousins at confiscating money from the private sector?

One reason is that European countries have value-added taxes, which are a disturbingly efficient way of generating more revenue. So does this mean that “Hauser’s Law” will protect us if politicians are too scared to impose a nationwide sales tax? That’s certainly a necessary condition for restraining government, but probably not a sufficient condition. If you look at the table, which is excerpted from the OECD’s annual Revenue Statistics publication, you can see that nations such as New Zealand and Denmark have figured out how to extract huge amounts of money using the personal and corporate income tax.

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