Federal Government · Personal Finance

Why A Balanced Budget May Not Work

Ever since at least the 1990s, conservative Americans have been fixated on the importance of a constitutional amendment to ensure federal revenues do not fall short of expenditures. The idea picked up a lot of steam during the rise of the Tea Party movement in 2010, and now some Democrats are even advocating for such a reform.

At its base, the notion is attractive. By placing legal limits on spending, we might prevent the runaway inflation and financial ruin likely to be foisted upon ours or future generations. In his book The Liberty Amendments, Mark Levin expanded the concept by suggesting a cap on the size of government spending at 17.5 percent of GDP, and a mandatory 5 percent cut in overall spending if Congress fails to adopt a budget.

This all sounds great, but several problems remain. First off, most plans include exceptions for emergencies and times of war. The obvious fail point would be politicians declaring a health crisis like coronavirus to be indefinite, or using the so-called “War On Terror” as justification to spend without limit.

An equally significant issue is the risk of “off-the-books budgeting,” which has been practiced for years by government officials. In Nazi Germany, it was employed to get around the Versailles Treaty restrictions concerning maximum outlays on military buildup projects. During the years leading up to the 2008 financial crisis, the Greek government acted with related malevolence, only in their case it was to complete corrupt real estate deals and hide inflated salaries that violated EU standards.

Believe it or not, America is hardly free of these unethical strategies. The Central Intelligence Agency has been allowed to evade federal budgetary restrictions for decades, and a recent audit of the DOD revealed the agency is incapable of accounting for billions – if not trillions—of taxpayer money spent on a variety of projects.

The upshot is that while a balanced budget amendment might improve the nation’s solvency on paper, it fails to prevent the eternal scheming of the political class to bankrupt our treasury in pursuit of their own interests.    

Federal Government

Politicians Are Never “Ready”

Governor Andrew Cuomo of New York was just quoted saying his state is “not yet ready” for the anticipated coronavirus peak over the next week.

Newsflash: politicians are never prepared. Maybe it says something about the nature of government, although one would think “use or lose” federal budgetary strategies make an increased medical stockpile quite sensible. Instead, they whiz the money away on nothing and then claim there is a massive equipment crisis when things go bad.  

The bigger issue is this: no one gets rewarded politically for thinking ahead. Humans have been trained to expect a state-sanctioned RESPONSE, something to calm their nerves and fill the headlines. Thus being the dutiful worker ant doesn’t help where attentions are concerned.

Suppose Trump and Co. had 600 million reusable facemasks in storage, a containment plan ready to go, and “a hospital ship for every diversity region.” Would the media cheer? Might we count on Democrats to clap their hands? Probably not, because the issue itself would be less threatening. The politician is only paid election-wise for effectively putting on a show, not demonstrating foresight. If Trump’s reaction looks good, he will benefit, but otherwise his opponents win. Simple as that.

For all these reasons, individuals need to prepare. The government can do marvelous things, but it rarely thinks out of the box, or even about the future.


The Impoundment Act Is Unconstitutional

Trump broke the law.

That’s the shrill new screech echoing in the footsteps of the GAO report, which claims his administration was a bit naughty when it withheld foreign aid to the government of Ukraine. According to the GAO, this constitutes a violation of the Congressional Budget and Impoundment Control Act of 1974.

Of course this output presents a critical question: how has the federal law on impoundment not been ruled unconstitutional?

As a bit of background, the legislation was passed under the administration of President Nixon to curtail congressional rage over his “setting aside” of money he did not believe in spending. To be clear, Nixon was not vetoing the spending, but simply declining to release it for specific programs.

The Act simply represented another attempt by Congress to keep the coffers flowing and hamstring the president into agreeing to “all or nothing.” We see the consequences regularly today with Trump signing massive spending bills because there is no way to pick and choose based on practicality or need.

Supporters of impoundment restrictions will point to the alleged supremacy of the legislature, but history undermines them sharply if we assume the branches are co-equal.

For instance, Congress passed the Line Item Veto Act of 1996, giving the president power to pick and choose what he would accept from appropriations. Bill Clinton used this mechanism 82 times to help bring the budget under control, but the legislation was struck down by a liberal-conservative SCOTUS majority in Clinton v. City of New York, which concluded that the president must to accept all or nothing with spending bills.

In his dissent, Justice Stephen Breyer noted:

“does not violate any specific textual constitutional command, nor does it violate any implicit Separation of Powers principle.”

Now, if we stick with the court’s majority opinion that Congress’ power to spend cannot be moderated or limited save on a “take it or leave it” basis without a constitutional amendment, then how exactly is it permissible for them to turn around and restrict the president’s power to release funds using only a legislative act?

It’s time to challenge the Impoundment Act before the Supreme Court.