Making Economic Sense
Making
Economic Sense
by Murray Rothbard
(Contents
by Publication Date)
Chapter 65
The Balanced-Budget Amendment Hoax
It is a hallmark of the triumph of image over
substance in modern society that an
administration which has submitted to Congress budgets with the biggest
deficits in American
history should propose as a cure-all a constitutional amendment
mandating a balanced budget.
Apart from the high irony of such a
proposal from such a source, the
amendment-mongers don't seem to realize that the same pressures of the
democratic process that
have led to permanent and growing deficits will also be at work on the
courts that have acquired
the exclusive power to interpret the Constitution. The federal courts
are appointed by the
executive and confirmed by the legislature, and are therefore part and
parcel of the government
structure.
Apart from these general strictures on rewriting
the Constitution as a panacea for our ills,
the various proposed balanced-budget amendments suffer from many deep
flaws in themselves.
The major defect is that they only require a balance of the future estimated
budget, and not of the
actual budget at the end of a given fiscal year. As we all should know
by this time, economists
and politicians are expert at submitting glittering projected future
budgets that have only the
foggiest relation to the actual reality of the future year. It will be
duck soup for Congress to
estimate a future balance; not so easy, however, to actually balance
it. At the very least, any
amendment should require the actual balancing of the budget at the end
of each particular year.
Second, balancing the budget by increasing taxes is
like curing influenza by shooting the
patient; the cure is worse than the disease. Dimly recognizing this
fact, most of the amendment
proposals include a clause to limit federal taxation. But
unfortunately, they do so by imposing a
limit on revenues as a percentage of the national income or gross
national product. It is absurd to
include such a concept as "national income" in the fundamental law of
the land; there is no such
real entity, but only a statistical artifact, and an artifact that can
and does wobble according to the
political breeze. It is all too easy to include or exclude an enormous
amount from this concept.
A third flaw highlights again the problem of
treating "the budget" as a constitutional
entity. As a means of making the deficit look less bleak, there has
been an increasing tendency
for the government to spend money on "off- budget" items that simply
don't get included in
official expenses, and therefore don't get added to the deficit. Any
balanced-budget amendment
would provide a field day for this kind of mass trickery on the
American public.
We must here note a disturbing current tendency for
"born again" pro-deficit economists
in conservative ranks to propose that "capital" items be excluded from
the federal budget
altogether. This theory is based on an analogy with private firms and
their "capital" versus
"operating" budgets. One would think that allegedly free-market
economists would not have the
effrontery to apply this to government. Get this adopted, and the
government could happily throw
away money on any boondoggle, no matter how absurd, so long as they
could call it an
"investment in the future." Here is a loophole in the balanced-budget
amendment that would
make any politician's day!
A fourth problem is that the various proposals make
it all too easy for Congress to
override the amendment. Suppose Congress or the president violate the
amendment. What then?
Would the Supreme Court have the power to call the federal marshals and
lock up the whole
crew? To ask that question is to answer it. (Of course, by making the
budget balance prospective
instead of real, this problem would not even arise, since it would be
almost impossible to violate
the amendment at all.)
But isn't half a loaf better than none? Isn't it
better to have an imperfect amendment than
none at all? Half a loaf is indeed better than none, but even
worse than no loaf is an elaborate
camouflage system that fools the public into thinking that a loaf
exists where there is really none
at all. Or, to mix our metaphors, that the naked Emperor is really
wearing clothes.
We now see the role of the balanced budget
amendment in the minds of many if not most
of its supporters. The purpose is not actually to balance the budget,
for that would involve
massive spending cuts that the Establishment, "conservative" or
liberal, is not willing to
contemplate.
The purpose is to continue deficits while deluding
the public into thinking that the budget
is, or will soon be, balanced. In that way, the public's slipping
confidence in the dollar will be
shored up. Thus, the balanced-budget amendment turns out to be the
fiscal counterpart of the
supply-siders' notorious proposal for a phony gold standard. In that
scheme, the public would not
be able to redeem its dollars in gold coin, the Fed would continue to
manipulate and inflate, but
all the while this inflationist
policy would now be cloaked in the confidence-building
mantle of gold.
In both plans, we would be dazzled by the shadow,
the rhetoric of sound policy, while the
same old program of cheap money and huge deficits would proceed
unchecked. In both cases, the
dominant ideology seems to be that of P.T. Barnum: "There's a sucker
born every minute."
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