Tags: Coronavirus | balanced budget | pandemic

End Pandemic Panic, Restore Prosperity With Balanced Budget Amendment

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By Tuesday, 19 May 2020 09:14 AM Current | Bio | Archive

Going into massive debt is rarely consistent with prosperity. Rather the opposite.

President Trump once bragged that "I'm the king of debt. I'm great with debt. Nobody knows debt better than me," Trump told Norah O'Donnell in an interview that aired on "CBS This Morning." "I've made a fortune by using debt, and if things don't work out I renegotiate the debt. I mean, that's a smart thing, not a stupid thing."

Meaning: Trump repeatedly stuck it to his presumably gullible creditors. He there was bragging about defaulting on millions of dollars of business borrowing. Now, he raises the stakes by a million-fold! And guess what? We, the people, are now the ones on the hook!

Now, under President Trump's leadership, the federal government is incurring trillions (millions of millions), not mere millions, of dollars in new debt. Donald Trump may have been King, but President Trump is securing his claim to the title of Emperor of debt.

That said, a few of us still prefer that the government confine its spending to its income except when incurring debt for appropriate public capital improvements such as roads, bridges, aqueducts and sewer systems. When dealing with elected officials, getting spending restraint is easier said than done. What to do?

President Ronald Reagan, at a fundraising reception for Sen. Orrin Hatch, once said:

"I made a speech a while ago comparing their spending habits to those of drunken sailors. And then a number of my staff members told me that that was unfair to drunken sailors because they at least were doing it with their own money. Seriously though, it's clear that Congress is incapable of coming to grips with the challenge of deficit spending. It is time for structural change, for a line-item veto, and for a balanced budget amendment. Eighty-five percent of the American people say they want just that — think of that, a balanced budget amendment. …  It's an idea whose time has come. It's an idea that was first thought of by Thomas Jefferson. He said it was the greatest omission in the Constitution that the government was not denied the right to borrow. Well, let's make old Tom happy."

Per Wikipedia, "Balanced-budget provisions have been added to the constitutions of most U.S. states, the Basic Law of Germany, the Hong Kong Basic Law, Spain, Italy and the Swiss Constitution. It is often proposed that a balanced-budget rule be added to the federal United States Constitution. Most balanced-budget provisions make an exception for times of war, national emergency, or recession, or allow the legislature to suspend the rule by a supermajority vote."

There are many different ways to structure a balanced budget amendment. Given the importance of the First Commandment (a 28% top tax rate) and Second Commandment (not taking away deductions and credits except to cut rates) of Capitalism it is important that such an amendment be written to withhold from Congress any pretext for raising taxes.

This version seems to have generated the greatest consensus: "The Treasury and any other instrumentality of the United States shall not incur any additional bonded liabilities except upon approval by two-thirds of the legislatures of the States." This requires a supermajority of states to raise the debt ceiling. Now the Congress, after some wild posturing and playing chicken, inevitably grants itself an increase in its credit line. Facepalm!

PolitiFact reports that (at least) 46 out of the 50 states are legally required to balance their budgets. Most conventional economists, having been indoctrinated in the Keynesian deficit spending to prime the pump during downturns, are appalled at the idea that the federal government would have to balance its budget. The requirement of a balanced budget does not seem to have damaged the citizens of those states.

The Capitalist League's mission is to create universal affluence. Not hardship. That said, note that the citizens of Latvia and Estonia, after tightening their belts during the Great Recession of 2007-09, ended up with the fastest growing economies in Europe. Hence our support for a balanced budget amendment.

Per The Guardian: "The example of Latvia is particularly stark. The small Baltic state suffered the worst recession in Europe, with a 24% drop in GDP between 2007 and 2009. Two years later its economy was the fastest growing in the EU, putting Latvia in a position possibly to join the euro. Estonia, meanwhile, grew by 7.6% last year, five times the eurozone average."

So! We don't buy the idea that forcing government to live within its means is economically suicidal. Welcome to the Seventh Commandment of Capitalism, the requirement that Uncle Sam spend no more than he takes in (and not raise taxes to take in more!)

Ralph Benko, co-author of "The Capitalist Manifesto" and chairman and co-founder of "The Capitalist League," is the founder of The Prosperity Caucus and is an original Kemp-era member of the Supply Side revolution that propelled the Dow from 814 to its current heights and world GDP from $11T to $88T. He served as a deputy general counsel in the Reagan White House, has worked closely with the Congress and two cabinet agencies, and has published over a million words on politics and policy in the mainstream media, as a distinguished professional blogger, and as the author of the internationally award-winning cult classic book "The Websters' Dictionary: How to Use the Web to Transform the World." He has served as senior adviser, economics, to APIA as an advocate of the gold standard, senior counselor to the Chamber of Digital Commerce and serves as general counsel to Frax.finance, a stablecoin venture. Read Ralph Benko's reports — More Here.

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When dealing with elected officials, getting spending restraint is easier said than done. What to do?
balanced budget, pandemic
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2020-14-19
Tuesday, 19 May 2020 09:14 AM
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