Skip to comments.Let's Limit Spending: Why a Balanced Budget Amendment is not the key to our Big Government problems.
Posted on 02/06/2018 8:32:56 AM PST by SeekAndFind
Some people have called for a balanced budget amendment to our Constitution as a means of reining in a big-spending Congress. That's a misguided vision, for the simple reason that in any real economic sense, as opposed to an accounting sense, the federal budget is always balanced. The value of what we produced in 2017 our gross domestic product totaled about $19 trillion. If the Congress spent $4 trillion of the $19 trillion that we produced, unless you believe in Santa Claus, you know that Congress must force us to spend $4 trillion less privately.
Taxing us is one way that Congress can do that. But federal revenue estimates for 2017 are about $3.5 trillion, leaving an accounting deficit of about $500 billion. So taxes are not enough to cover Congress' spending. Another way Congress can get us to spend less privately is to enter the bond market. It can borrow. Borrowing forces us to spend less privately, and it drives up interest rates and crowds out private investment. Finally, the most dishonest way to get us to spend less is to inflate our currency. Higher prices for goods and services reduce our real spending.
The bottom line is the federal budget is always balanced in any real economic sense. For those enamored of a balanced budget amendment, think about the following. Would we have greater personal liberty under a balanced federal budget with Congress spending $4 trillion and taxing us $4 trillion, or would we be freer under an unbalanced federal budget with Congress spending $2 trillion and taxing us $1 trillion? I'd prefer the unbalanced budget. The true measure of government's impact on our lives is government spending, not government taxing.
Tax revenue is not our problem. The federal government has collected nearly 20 percent of the nation's gross domestic product almost every year since 1960. Federal spending has exceeded 20 percent of the GDP for most of that period. Because federal spending is the problem, that's where our focus should be. Cutting spending is politically challenging. Every spending constituency sees what it gets from government as vital, whether it be Social Security, Medicare and Medicaid recipients or farmers, poor people, educators or the military. It's easy for members of Congress to say yes to these spending constituencies, because whether it's Democrats or Republicans in control, they don't face a hard and fast bottom line.
The nation needs a constitutional amendment that limits congressional spending to a fixed fraction, say 20 percent, of the GDP. It might stipulate that the limit could be exceeded only if the president declared a state of emergency and two-thirds of both houses of Congress voted to approve the spending. By the way, the Founding Fathers would be horrified by today's congressional spending. From 1787 to the 1920s, except in wartime, federal government spending never exceeded 4 percent of our GDP.
During the early '80s, I was a member of the National Tax Limitation Committee. Our distinguished blue-ribbon drafting committee included its founder, Lew Uhler, plus notables such as Milton Friedman, James Buchanan, Paul McCracken, Bill Niskanen, Craig Stubblebine, Robert Bork, Aaron Wildavsky, Robert Nisbet and Robert Carleson. The U.S. Senate passed our proposed balanced budget/spending limitation amendment to the U.S. Constitution on Aug. 4, 1982, by a bipartisan vote of 69-31, surpassing the two-thirds requirement by two votes. In the House of Representatives, the amendment was approved by a bipartisan majority (236-187), but it did not meet the two-thirds vote required by Article 5 of the Constitution. The amendment can be found in Milton and Rose Friedman's "Tyranny of the Status Quo" or the appendix of their "Free to Choose."
During an interview about the proposed amendment, a reporter asked why I disagreed with the committee and called for a limit of 10 percent of GDP on federal spending. I told him that if 10 percent is good enough for the Baptist Church, it ought to be good enough for the U.S. Congress.
Something tells me Adams and Hamilton would feel right at home.
Every spending constituency sees what it gets from government as vital, whether it be Social Security, Medicare and Medicaid recipients or farmers, poor people, educators or the military. oh no! He lumped SS in with all the other ones. Start up the Freeper defense of Social Security.
No, but it is a very big part of the key.
Right now, the Democrats and some of the liberal Republicans think excessive spending and deficits are painless and will never matter.
But if there is a Balanced Budget Amendment, there are still Democrats, probably few even liberal Republicans, willing to raise taxes to the stratosphere.
Yet this is key. Democrats think taxes are strictly to punish those they hate. They do not care about raising revenues. So their tax policies are worthless.
Only those that understand taxes get that taxes that do not result in revenues must be eliminated.
So the fools might try to raised taxes to 500% of revenues and other income. But with no money rolling in, if they cannot deficit spend, there is nothing left to spend.
Totally agree with Walter Williams.
No. 1 Reason:
Because the lying, cheating, scallywags in Congress just ignore rules and laws.
Even today they authorize expenditures “off budget”.
If only that were true. Ever heard of 'unfunded liabilities'? Screw it up now and retire before the reckoning - that's the politicians' motto.
The _federal_reserve_ is the food which created the deep, dark state. It is the illusion which fuels the cancer which is unconstitutional DC.
Yes, but the key difference is that the Feds can print money to dig their way out of that. States can't, and sooner or later, a real-world bill comes due.
Also, those unfunded liability are for payments required in future years. Year to year (more or less), they have to balance. The feds don't, again because of their ability to sell more Treasury securities and print money.
Walter is right again. Tell the government they can spend no more than 10% of the GDP...period. No more borrowing money. Another option would be no more than 10% of our cumulative adjusted gross income, where we would add up all of our incomes, deduct charitable giving only, and figure out how much we will give the Feds to spend. Otherwise, the Feds just borrow money to cover the ill-named “budget.”
As Walter says, we do not need a balanced budget. We need a limited amount of money that goes to D.C.
oh no! He lumped SS in with all the other ones. Start up the Freeper defense of Social Security.Every spending constituency sees what it gets from government as vital, whether it be Social Security, Medicare and Medicaid recipients or farmers, poor people, educators or the military.
Anyone who collects Social Security should, within their means, pass that money directly on to their children. Not everyone can do that but, considering the Ponzi Scheme nature of Social Security funding and the illusory nature of the Social Security Trust Fund," its the only way to be fair to your children. Who should then consider your grandchildren in their disposition of whatever money Social Security delivers to them.
Whatever government spending limit you set, it should definitely be within the means of the tax base to sustain it.
One way to assure that would be to simply limit the government to spending last years revenue. Then when the governmentists (calling themselves liberals) raise the tax rate too high and cause a recession, the spending limit would automatically drop.
There is no need for a balanced budget amendment. There is a law on the books that states that the Federal government cannot spend more than it takes in. This law was adopted in 1981, Public Law 95-435, Section 7. It is still valid, so why do our elected officials in Congress not obey that law?
That raises a number of other questions. Is there a penalty clause for violations of the law? Can every politician who voted in favor of violating the law be punished? Is a violation a misdemeanor or a felony? Who would be in charge of prosecuting the offenders?
We the people are expected to obey the law; why won’t we hold our servants (who have, regrettably, morphed into masters) to the same standard?
Finally, since the law is already being ignored, what makes us think that an amendment would not also be ignored? The second amendment being a prime example in New Jersey; what part of “shall not be infringed” do they not understand?
He’s absolutely right we need to limit spending to 20% or less.
A Ballance budget amendment really only limits the ablity of Congress to lie to the people in how much they are taking. That in itself is a good thing.
Indeed we can bring the Democrats onboard with such an amendment simply by convening them that the public believes government cost them more than it does. Lying works both ways of course.
But ultimately it’s not the point that costs us our prosperity and freedom, forced spending is.
Forced spending is what takes from our children the fruits of their labor.
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