Constitutional Balanced Budget Amendment

Steve Brawner in his article “Safer roads and balanced budgets,” Arkansas News Bureau, April 13, 2011, noted:

The disagreement is over the solutions — on what spending to cut; what taxes to raise (basically none ever, according to Boozman); whether or not to enact a balanced budget amendment (Boozman says yes; Pryor no); and on what policies would promote the kind of economic growth that would make this a little easier.

Dan Mitchell wrote a great article called “Why a Tax Limitation/Balanced Budget Amendment is Needed to Control Spending,” Cato Institute, Feb 19, 1997. I will be posted portions of that article the next few days. Here is the first portion:

Introduction

After nearly 30 consecutive years of deficit spending, Congress soon will vote on whether to add a balanced budget amendment to the Constitution. Should an amendment be approved by Congress and ratified by the states, the fiscal policy changes could be enormous. The objective of imposing such discipline is to balance the budget by reducing the size of government. A strong provision to limit taxes — such as a two-thirds supermajority requirement to raise taxes — would help ensure that politicians could not evade the amendment’s intent by simply replacing debt-financed spending with tax-financed spending.

For much of America’s history, government debt was kept under control. On those rare occasions on which budget deficits did occur, almost invariably because of war or economic downturn, lawmakers would approve budget surpluses in subsequent years. Unfortunately, beginning in the 1930s and culminating in the 1970s, this strong sense of fiscal responsibility was replaced by the view that deficit spending was good for the economy.

Armed with the rationale that more government would help the economy, politicians therefore were free to indulge in special-interest spending on an unprecedented scale. The fiscal policy consequences, not surprisingly, have been unpleasant. In particular:

• The annual budget today is nearly 18 times larger than it was in 1960.
• In inflation-adjusted dollars, government spending has tripled.
• Government is now spending nearly $6,100 for every man, woman, and child in America, up from $510 in 1960.
• Since 1960, the budget has been balanced only once, and deficit spending has increased the national debt from less than $237 billion to nearly $3.9 trillion.¹
• Each person’s share of that $3.9 trillion debt is more than $14,450, up from $1,311 in 1960.
• Interest payments on the debt now consume about $240 billion annually — more than the combined budgets of the Departments of Commerce, Agriculture, Education, Energy, Justice, Interior, Housing and Urban Development, Labor, State, and Transportation.

The real news is even worse: The government’s official debt calculation does not include $10 trillion to $20 trillion in unfunded liabilities for Social Security, Medicare, government employee retirement programs, and other programs.

This rampant use of deficit spending not only endangers the well-being of millions of Americans, but also has mortgaged the future of America’s children. The United States needs a balanced budget now. Even more important, however, is how the budget is balanced. If policymakers want a balanced budget amendment to promote faster economic growth, they need to make sure that their efforts result in less government spending. And the only way to do that is by adding to the amendment a meaningful tax limitation provision.

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If you know anything about me, then you know that in 1980 my political life was forever changed by a man by the name of Milton Friedman. He could take tough questions that I could not answer and provide easy answers backed up with facts. For instance, I was told by my liberal professors at college that the founding fathers envisioned a small simple government that would never work in the complicated world we live in now. How was I to answer? Take a look below at the answer that Milton Friedman had.

Today I have included some comments from Milton Friedman from his Film Series “Free to Choose: Episode 10 How to Stay Free,” which addresses several issues concerning how to control our spending.

Lawrence E. Spivak: Let’s go back to Jefferson. You say cut the functions of central government to the basic functions advocated by Jefferson which was what? Defense against foreign enemies, preserve order at home, and mediate our disputes. Now, can we do that in the complicated, the complex world we live in today, without getting into very serious trouble.

Friedman: Suppose we look at the activities of government in the complex world of today. And ask to what extent has the growth of government arisen because of those complexities? And the answer is, very little indeed. What is the area of government that has grown most rapidly? The taking of money from some people and the giving of it to others. The transfer area. HEW, a budget 1_1/2 times as large as a whole defense budget. That’s the area where government has grown. Now, in that area, the way in which technology has entered has not been by making certain functions of government necessary, but by making it possible for government to do things they couldn’t have done before. Without the modern computers, without modern methods of communication and transportation, it would be utterly impossible to administer the kind of big government we have now. So I would say that the relation between technology and government has been that technology has made possible big government in many areas, but it’s not required it.

Ronald Reagan on Milton Friedman

Ronald Reagan introduces a volume of the documentary series Free To Choose by Milton Friedman. From the 1990 series, volume 3 of 5.

Below are some other posts I did about Milton Friedman’s ideas:

Who was Milton Friedman and what did he say about Social Security Reform? (Part 1)