From AFP:
The US budget deficit shot up 15.7 percent in the first six months of fiscal 2011, the Treasury Department said Wednesday as political knives were being sharpened for a new budget battle.
The Treasury reported a deficit of $829 billion for the October-March period, compared with $717 billion a year earlier, as revenue rose a sluggish 6.9 percent as the economic recovery slowly gained pace…
The government argues that this is a reflection of this, that or the other special circumstance which weren’t foreseen when budget projections were made. Yeah, no kidding. Which is why one has to be very careful when reading projections – the only thing which is consistent about government is that, on the whole, more will be spent than projected and revenues won’t grow as fast as expected. The reason for this is that the government likes to lie to us about this. It is much easier, you see, to get the people to swallow another Big Government pill if you say it will only cost so much – when the real bill comes in, its too late…the money is already spent. As for revenues, government always presumes that the economy is a Magic Money Tree and will provide whatever is necessary – and revenue projections never take in to consideration the negative aspect of increased taxes on economic activity (and they also never take in to consideration the positive aspects of reduced taxes).
Ultimately, only a Balanced Budget Amendment will get this permanently under control. But not just any, old amendment – it will have to be carefully crafted it to “idiot-proof” it from Congressional action. In my view, an amendment should have the following provisions:
1. Set total federal spending as a percentage of GDP in the previous fiscal year. So, if we set it at 20% of GDP and last year’s GDP was $14 trillion, then Uncle Sam cannot spend more than $2.8 trillion dollars. The only way federal spending can go up is if GDP goes up.
2. Remove government spending from calculations of GDP – no fair raising government spending to raise the GDP numbers so you can raise government spending some more.
3. Require a 2/3 vote in Congress for raising the debt ceiling.
4. Forbid the sale of US debt to foreign persons, groups or governments; if you can’t borrow it from Americans, it can’t be borrowed.
5. Set statutory limits on the total dollar value of US currency in circulation at any given time. Someone will have to crunch the numbers, but figure it out and then don’t let the Federal Reserve go on a money-printing spree (and, really, this would just be a first step towards returning to the gold standard for currency).
Do that, and Congress will forever lose the power to bankrupt us. There is still gigantic flexibility in there on what to spend money on – there just won’t be the ability to pretend there is an endless supply of money. Congress will have to set priorities. There is still bags of money to spend ($2.8 trillion isn’t chump change, after all) but not enough for what every dimwit in Congress would like to spend it on.
If we don’t do something along these lines, then we’ll just risk being driven in to bankruptcy at some later date, even if we dodge the bullet this time. The genius of America is to put all sorts of limits on what government may do. Our Constitution had many wise provisions to prevent recklessness on the part of government but over 200 years, ways were found around those provisions. This sort of a Balanced Budget Amendment would take what we’ve learned and apply it to government – it will allow we, the people, to once again be one step ahead of the government.
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