Do you Really Want a Balanced Budget Amendment?

by Dale A. Johnson on July 19, 2011

in Banking, Connecting the Dots, Deep Economy, Ecological Economics, Economics, Outside the Box

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Copyright (C) 2011, Dale A. Johnson. All Rights Reserved.

The rainbow in the grey skies is magical and alluring. But take a look at history before suggesting that the USA should operate under the limitations of a balanced budget. A good place to start is by searching on milestone wars that made or saved this country. Try a search such as “US Revolutionary War debt,” “US Civil War debt,” or “US WW2 debt.”

Then try to decide if the US Constitution had such an amendment from day one would we:

  • Be a British colony?
  • Have slaves?
  • Speak German?

Would we have climbed out of the Great Depression without Roosevelt applying Keynes’ ideas on government projects?

The idea of sending America’s youth into battle without proper equipment and financial support is powerful motivator for me. I was in the Air Force during a budget battle and we literally could not fly our fighters because Congress did not approve enough money for fuel while they argued about the overdue budget! Thankfully that was peace time.

Copyright (C) 2011, Dale A. Johnson. All Rights Reserved.

Let’s take a look at the financial meltdowns this country has encountered and the effects that a Balanced Budget amendment would have had. Take a look at just two, the Great Depression and the 2008 meltdown. The government did not do all the right things to prevent or solve these problems. The solutions (i.e. the recovery) required combination of forces including government spending, Wall Street and Main Street.

Search on “US Depression debt” and read current events to see the impact of such economic events on the deficit. Thank you Uncle Sam for pitching in to take away the pain and suffering that literally millions of Americans faced during these crashes. I am glad you had a credit card to use to save us!

The metaphorical Atlas – is he the government or the taxpayers? Ours is an experiment in government of the people, by the people, for the people.” Is there a difference?

I probably should stop here but …
Even with deficit spending the government did not save many who literally starved to death during the Great Depression. What about those that are hungry today as the government plays politics instead of doing their jobs?

Since the 2008 meltdown the government has spent up the deficit to attempt to minimize the damage. It (the government) has tried to hold things together but the recovery is failing. The failure of this recovery has more to do with the missing contributions from Wall Street and Main Street. (I cannot believe how much the market goes up when the dollar looses value!) If corporations would invest in their businesses, in a manner that includes domestic employment (rather than outsoucing), the recovery would be much stronger. US corporations are not doing much with the cash on their balance sheets. They have to get things moving; the government cannot do it alone. Corporations just have to invest in themselves; they do not really have to hire full time employees. Updated systems needed for their business, improved facilities, energy efficiency and renewable energy systems would all create more jobs without expanding the company’s payroll. Investments in energy efficiency would lower costs. Such investments would create economic activity that would kick start the recovery and allow Main Street to get in on the recovery. Instead it seems that companies would rather just count their money until the elusive order flow starts.

Many states and cities operate under the requirement of a balanced budget. Why shouldn’t the Federal Government do the same? Maybe this is another chance to review current events to get your answer. In the compromised 2011 budget many state and local lifelines of “recovery” cash were stopped. These funds (federal deficit spending) were directed largely to keeping first responders employed. Federal money was used to pay the paychecks of state and local cops, firemen, etc. Open the local news in many areas across the country (since the 2011 budget deal was made) and you will see how many newly unemployed public servants there are.

The government has never (so far) caused a financial meltdown. Our history of deficits has not caused any grandchild to ever pay off their grandparents’ debt. If Wall Street and Main Street start investing in themselves enough dollars will flow to generate revenues for all levels of government and this whole argument would be mute. Employment will recover, then housing, durable goods, and other sectors would recover. We would be able to focus on other important issues – like competing with China and Germany.

So do you really want a Federal Balanced Budget amendment? Really? Be careful what you wish for.

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