Viewpoint: Is Balancing the Budget Really a Bad Idea?


Whatever else Gov. Jerry Brown has done by his trumpeted endorsement of the National Taxpayers Union's call for a constitutional amendment to balance the federal budget, he has provided another illustration of Alexis de Tocqueville's sure grasp of politics. Tocqueville knew that the supporters of a cause are apt to be deceived because "they always only think of the pleasure they themselves derive from the speech of their great orator, and never of the dangerous excitement he arouses in their opponents."

Governor Brown's speech on the need to radically change the fiscal policies in Washington was indeed a great one. He said what we at NTU have been inviting political leaders of his stature to say for the last four years. He said it well enough to be heard over the whole din of contentions in this contentious country. Whether he spoke from conviction or merely to seize what he correctly perceives as an opportunity to represent the views of the overwhelming majority of the public, we applaud his actions. Our only regret is that he spoke too well, arousing the excitement of the Washington Post editorial writers and others whose thinking on fiscal matters may be slightly out of date.

While opponents of balancing the budget such as the Washington Post speak disparagingly of "the economic theology of the Hoover era and the 19th Century," it is they whose thinking is backward-looking. The very mention of Hoover is indicative of an economic mind-set informed by the conditions of 50 years ago. Like French generals preparing to fight the last war, opponents of fiscal responsibility under today's conditions are trying to combat the future with the weapons of the past.

Lord Keynes is by now a "defunct economist" himself, and any society that insists upon operating its financial affairs upon the basis of his most problematic ideas is also moving toward being defunct. The idea that excessive government spending is needed to fight recession has been ruled out of order by experience. It is precisely the deficits, now become habitual, and the inflation they generate that are the cause of recessions, and perhaps ultimately of a depression. The American people understand this. That is why an overwhelming majority of all parties and backgrounds support decisive action to outlaw deficit spending. They recognize the need for fiscal balance not because they are old-fashioned but because they have lived with the failed policies and know them for what they are.

No less an observer than British Prime Minister James Callaghan has said: "We used to think that you could spend your way out of a recession and increase employment by cutting taxes and boosting government spending. I tell you, in all candor that that option no longer exists, and that insofar as it ever did exist it only worked by injecting bigger doses of inflation into the economy followed by higher levels of unemployment as the next step. That is the history of the past 20 years." So it is. Only persons thinking the thoughts of 50 years ago could fail to see it.

Another curious aspect of the controversy over NTU's movement to balance the budget is that opponents invariably affect an air of sober responsibility, yet often themselves seem little touched by the spirit they invoke. For example, the Post claims that there is a confusion in the constitutional-convention calls that have been issued by 27 state legislatures. The editorial writers complain that the resolutions mandate a balanced budget "without defining one." This is cited as an indication that the process of calling for a constitutional convention has been undertaken "with little thought."

In fact, the matter is more nearly the opposite. The wording of these resolutions has been perfected after close study of the constitutional requirements for convening a convention. It is the opinion of most legal scholars, including those who authored a recent American Bar Association report—"Amendment of the Constitution by the Convention Method under Article V"—that a call for a convention must not be overly specific. If it were, it might be ruled invalid. The legislatures do not write a proposed amendment in their call; they merely mandate action to correct a given defect.

It is our judgment that 27 resolutions calling for a constitutional convention to balance the budget meet this standard. That the Post would take up the line; of criticism it has, suggests that whoever wrote the editorial assumed a posture of authority without being responsible enough to investigate the issue closely.

It is not true, as claimed, that the resolutions pose language problems, other than perhaps the problems of style inherent in legislative prose. Neither is it true that enactment of a constitutional amendment outlawing deficit spending would inhibit politicians from dealing flexibly with varying economic conditions. People advancing this argument ignore the fact that Congress could increase expenditures within limits by working with a reserve fund. As Leon Sutton has written, "Building up a reserve fund for use in economically poor times is a standard accounting practice and has been used since at least the time of Joseph among the Pharaohs of Egypt. It in no way would violate an amendment requiring a balanced budget (unless, of course, it was specifically worded to exclude or limit the size of any reserve fund)." Further, every proposal before Congress provides for a temporary suspension of the balanced-budget requirement in the event of a genuine emergency.

A balanced-budget amendment would provide ample flexibility in enabling the Congress to operate the government smoothly. It would not require that actual programmatic expenditures equal total tax income in every given year. But it would prevent the excessive deficits that Congress and the president have made a matter of standard practice. It would reduce the power of special interests to obtain increased appropriations benefiting themselves while disguising the costs—in the form of inflation—that are spread throughout the society. As Governor Brown correctly points out, a constitutional amendment to balance the budget would help turn off the "perverse government money machine." That would control inflation because it would control the inflating.

Such a development is not only desirable but essential to preserving the civic virtues of democracy. These cannot be maintained through long-protracted inflation. The experience of many countries proves this. Inflation destroys the values upon which a liberal, humane society depends. It turns expectations upside down, impoverishing the elderly, making fools of those who save, turning every contract into a fraud, and eventually creating conditions that no person of good will could desire. As Thomas Mann wrote: "There is neither system nor justice in the expropriation and redistribution of property resulting from inflation. A cynical 'each man for himself' becomes a rule of life." In such a condition, when the majority is deprived, defrauded, and frightened, politics can take appalling turns. We dare not attempt to prove that America would be an exception to the rule that protracted inflation weakens and eventually destroys free institutions.

That is why we must heed the advice of responsible people of all parties, now joined by Governor Brown, and enact a constitutional amendment outlawing inflationary deficit spending.