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member is Milton Friedman. This amendment would control federal spending lsy accepting present levels but allowing increases only in proportion to increases in the gross national product. Government-created inflation would be deterred by reducing the allowed spending increase when inflation exceeds three per cent annually.
This spending-limit amendment deserves serious consideration. The case for it is compelling. It is unfortunate that the case against it seems hardly less so.
CASE FOR THE AMENDMENT
The case for the amendment is simply that we must somehow stop the seemingly inexorable rise in the share of society's wealth claimed by the federal government, and so far nothing short of a constitutional limit has worked. Perhaps only a constitutional check, one beyond the reach of ordinary majorities, can cope with the well-known pathology of social democracy: intense constituencies press for particular federal spending programs; generalized unhappiness with total outlays, taxes, and inflation prove ineffective to defeat specific claims; and, as a result, total spending mounts to levels that hardly anyone wants.
The long-term growth of government's share of national wealth (coupled with heavy regulation) is a serious, near-term threat to the vitality of the economy, particularly since it involves income redistribution that weakens incentives for both producers and recipients. Less obviously, perhaps, rising government spendiing is a long-term threat to American political freedom. Social and political discontents may increase beyond tolerable levels as the decreased size of the pie intensifies disputes about its division. Inflation, which may become endemic if spending is not controlled, has destroyed democracies before. Increasing sutsidies, with conditions attached, are a mode of coercion that may evade constitutional guarantees, allowing government to buy decreased freedom it could not order directly. Rising spending also fosters the growth of great bureaucraries whose choices increasingly displace those of elected representatives. Even if the rule of the bureaucracies proves both stable and benevolent, which is by no means to be assumed, it is not the sovereignty of the people.
We may, therefore, brush aside some common objections to any amendment dealing with fiscal matters. One, difficult to fathom, is that fiscal responsibility is inherently a matter for statutory control and does not "belong” in the nation's basic document; the hands of future voters ought not be tied. All constitutional provisions tie the hands of future voters, and, in many cases, a good thing wo. The question is instead one of the gravity of the danger addressed. Any systemie malfunctioning of government serious enough to threaten prosperity and freedom may properly be addressed by the Constitution. Nor is the aesthetic objection 5) the necessarily detailed, technical language of the amendment well taken. It come not only from dedicated statists, whose literary sensibilities are perhaps suspens in this instance, but also from persons like James Kilpatrick, who writes of the spending-limit: “This is not constitutional language, this is statutory language, and it has no place in the supreme law of the land." The notion that the Consi tution is reserved for grand statements of moral principle (whose vagueness has upon occasion caused a great deal of trouble) is neither an accurate description of the original document nor, if the need be plain, a sufficiently wieghty objectiva to the amendment.
There is, then, very good reason for the temptation to seize the moment, to capitalize upon the mood of tax revolt and transform it into constitutional struture before the mood fades. There are, unfortunately, three very real and sub stantial problems with the outlay amendment as it now stands.
1. Defense spending would have to compete under the outlay cap with risine costs of existing entitlement programs, such as Social Security, and these com seem certain to soar even if no new programs are added. Defense is one of the few really discretionary items in the budget for any particular year, and the temptation will always be to meet the limit by deferring defense expenditures f.: one more year. Given Soviet attitudes and levels of military spending, far les their defense needs, delays in our defense spending could prove calamitous. Th amendment's emergency clause is no safeguard because complex weapons syster: require years of lead time. Unless the clause were routinely invoked, which is unlikely since it requires a declaration by the President and two-thirds vote of each house, by the time an emergency was perceived, it would be too late.
CAUGHT BETWEEN TWO DANGERS
This may suggest that we are hopelessly caught between the dangers of rising government spending and the dangers of the outside world, that our choice is between the hegemony of the Soviet Union or that of HEW. Bleak as that thought is, most people would prefer HEW. Perhaps an amendment should contain a permanent exemption for defined defense spending. That might hurt its chances politically but so does the danger it now poses to national defense.
2. A different problem is that the amendment may not work at all. Forbidden to spend beyond a stated limit set by the previous year's expenditures and the increase in GNP, government has the power to force the private sector to make the expenditures it cannot. The technique is shown by current environmental and occupational safety laws and could easily be applied to Social Security or a national health plan. Real costs to the economy might be higher than direct government spending.
Perhaps this would be better than the hidden tax of inflation because the costs of regulation would presumably be opposed by an articulate business sector. At least the political choices would be more visible. But even that gain could be undercut by devices such as tax credits and government loan guarantees to replace direct spending.
Proponents of amendment admit this problem, and its apparent insolubility by drafting techniques, but argue that the amendment would nevertheless crystalilze a potent political opposition to such evasions. Perhaps. But it is impossible to forecast whether the symbol would prove effective or whether evasion would demean the Constitution and bring the ideal behind the amendment into contempt.
3. There is, finally, the problem of enforcement. A purely admonitory amendment seems undersirable, so court enforcement is provided. This provision avoids porblems of multiplicity of lawsuits, judicial control of particular outlays, and the like, but grounds for worry remain. The language and the subject matter are technical, so that almost endless opportunities for litigation, and hence for judicial dominance in the budget process, exist. Terms must be defined under endlessly varying circumstances; conventions about statistics, accounting, budget making and other arcane matters must be probed and specified. The prospect may be for nightmare litigation that would be damaging both to the judiciary and to the budgetary process.
(From Newsweek, Apr. 9, 1979)
Too Much DEMOCRACY?
(By Paul A. Samuelson) Many American votes are fed up with taxes. They see prices rising at doubledigit annual rates. As their real wealth melts, they fear for their future living needs.
The governmental share of the national income seems to them to grow remorselessly. Four months of the year are now spent working for the Washington octopus, the state-capital politicians and the town-hall bureaucrats. If the trend of the twentieth century's middle two quarters continues, by the year 2000 the people best educated and most industrious in the arts of commerce and production will be turning over to the rest of the community half the fruits of their effort.
John Adams and Alexander Hamilton warned against democracy. So did Edmund Burke and Thomas Babington Macaulay. Universal suffrage, they prophesied, would inevitably mean that the poorest 51 percent of the population would pillage the property of the frugal middle classes.
Present-day Jeremiahs are even more gloomy. They expect no part of the public to reap net benefit from the logrolling inherently involved in the legislative process. Even the poor do not receive what the rich lose.
The deadweight loss of inefficient and unresponsive representative government simply decimates the total social pie that we call real gross national product. The pace of economic progress is brought to a veritable halt as the government fritters away the resources needed for producing new capital equipment and plant, and as inept regulation poisons the wellsprings of technological advance and entrepreneurial innovation.
Workers are hurt along with owners of property, since any rise in real wages must come primarily from the accumulation of capital and the improvement of skills and managerial techniques. At best, it is only the politicians and bureaucrats who fatten and thrive under populist democracy.
I believe that the above paragraphs fairly summarize what many Americans have come to believe. My own analysis of the causes underlying our chronic stagflation has to run along different and less simple lines. If only it were true that old-fashioned demand-pull inflation was our primary problem!
Nor will historical experience with the political economy of social choice bega out the diagnosis that democracy by its nature must produce overlarge puiulie spending. The economic principles of collective decision making and of competitive game theory demonstrate that there is as much an inherent tendency for governments to spend too little as too much. What is everybody's business may be nobody's business. The pursuit of private profit will not keep carcinogens out of our rivers and atmosphere. Self-interest will not lead you and me to hire 39 army and navy to preserve the system that lets us be go-getters and private utility maximizers.
As the philosopher John Rawls has reemphasized in his “A Theory of Justice," we do not vote for social-security and welfare assistance out of love for Washington civil servants. Being human and realizing we are subject to the unknown periks of unemployment and destitution, we cannily opt for the mutual reinsurances of the modern welfare state, knowing that, but for the grace of God, the bell that tolls could be tolling for us. Your typhoid is my typhoid and we are all, so speak, citizens of the same Hiroshima.
When I was asked last week to testify before the Rodino Congressional suhcommittee dealing with constitutional amendments for balancing the budget, ali the above conflicts came up. On such occasions I do not deem it my function to press my value judgments on those with different ethical views. My duty as an economist is to present as accurately and objectively as I can what will be the likely costs and benefits from each proposed policy decision.
Even from the standpoint of those anxious to contain and reverse the trend toward an expanding public sector, historical experience suggests that it is unwise to use the Constitution to fix upon the nation for all time some particular formula of macro-economic policy.
Only recall 1930–32. Herbert Hoover tried disastrously to raise tax rates in the teeth of a worsening depression in order to balance the budget that inevita, ir had gone into deficit because of reduced tax collections. Had Roosevelt Uks forced by the Constitution to do the same, blood would have run in the streets
Economics is an inexact science. Rules that first seem good wreak havoc later. Winston Churchill was right. Democracy is a poor system; but no one has ever been able to design a better one. If a preponderant majority permanently wali less public spending, they'll get their way!
Government by law and not by men means flexible evolution through die process. It doesn't mean freezing into the Constitution each passing economic is
(From the Washington Star, Apr. 15, 1979)
PUTTING A BUDGET CRUTCH INTO THE CONSTITUTION
(By William F. Buckley Jr.) As we all know who know anything at all about polemics, the most freqoyant technique for attempting to abort a proposed reform is to recite a litany of these apocalyptic horrors that await its adoption. There are those who remem ar thai organized labor in opposing the Taft-Hartley bill predicted that it would bring slave labor. So it goes with the proposed constitutional amendment to limit federal spending.
The most popular outcry against it has been that it would convene an assembly of mad men whose jacobinical passions would transform the Constitution of the United States. There is nothing, it is widely believed, that would prohibit a constitutional convention, once convened, from going on to do anything it liked: prohibit abortion, prohibit affirmative action, repeal the Bill of Rights, hang Jimmy Carter from a sour apple tree, and so on. Concerning the above, a few observations:
(1) It is gradually creeping into the public consciousness that, of course, no measure promulgated by the constitutional convention would become a part of the Constitution until ratified by three-quarters of the states. The assumption that any fever that seized the convention would communicate to the deliberative mansions of 38 states is to say the least unreasonable. Another way to put it is that if three-quarters of the states are indeed willing to repeal the Bill of Rights, we've had it anyway.
(2) Who says the convention called to consider tax limitation could consider measures that are unrelated to tax limitation? The Constitution is silent on the subject. And since the Constitution is silent on details, the details become a political question. Since Congress issues the call it can define the jurisdiction of the convention.” That is the view of Paul Freund, distinguished constitutional scholar at Harvard. That also is the view of Attorney General Bell. That also is the view of a Constitutional Convention Study Committee commissioned by the American Bar Association in 1971.
(3) There is the practical economic argument that flexibility is needed. Professor Milton Friedman, who wrote the amendment to which Senators Heinz and Stone have given their name, is quick to acknowledge that the notion of balancing a budget every single year is not an economic, let alone moral, imperative.
Professor Laurence Tribe of the Harvard Law School, a lending critic of the proposed convention, comments, “The goal of a balanced budget would have to be couched either in such flexible and general terms as to be meaninglessly lax, or in such rigid terms as to be unthinkably harsh.” Now that, in consideration, really doesn't make much sense.
One of the 68 versions of a constitutional amendment sitting before the various judiciary committees calls for a very simple change, namely that all money bills must be approved by three-quarters of both houses. That is hardly a “meaninglessly lax” proposal.
Milton Friedman's is shrewder. He would permit an increase in spending but no greater than the increase in the preceding year's GNP. And then he would permit a two-thirds majority to increase that spending by a limited amount, and a three-quarters majority to spend without reference to the amendment.
Laurence Tribe's principal opposition-and in this he is joined by such distinguished conservatives as James Jackson Kilpatrick-has to do with the nature of the amendment. “The Constitution embodies fundamental law and should not be made the instrument of specific social or economic policies.”
The point is well taken. But the Constitution-worshipers should impose upon themselves a little perspective. In the first place, if they do indeed venerate the Constitution, then they should also venerate that clause in it which specifically provides for a constitutional convention called by two-thirds of the states. Why? The ABA report said, “the 'state' method (of amending the Constitution) was prompted largely by the belief that the national government might abuse its powers. It was felt that such abuses might go unremedied unless there was a vehicle of initiating amendments other than Congress.”
Now that is exactly what has happened. During the past generation, it is the Supreme Court that has, in effect, amended the Constitution. But what has developed is that the voting public both desires a sound dollar, is hopelessly bewildered by congressmen and senators who engage in systematic deception during the campaign periods, and is therefore reaching not for a deus ex machina, but for a broad underlying imperative.
It is on the order of the alcoholic who makes it a point to bar booze from his larder. Or the Christian who requires himself to go once weekly to church. Or the man who instructs his employer to deduct 10 per cent for the pension fund. It is sophisticated insight into the frailties of democratic government, and the people are crying out for a little constitutional crutch.
(From the Washington Star, Apr. 23, 1979)
A CONSTITUTIONAL BAN OF PROFLIGACY
(By William F. Buckley, Jr.) We have seen that the argument over the proposed constitutional amendment proceeds at many levels. One argument currently being stressed by the amendment's opponents is that economic doctrine ought not to be written into the Constitution, both because economic doctrine is a modish thing and because it is uncrystallized.
That is certainly true. The disestablishment of John Maynard Keynes during the past two decades is as convulsive an experience in iconoclasm as Dorothy's discovery that the dreaded Wizard of Oz was a cowardly middle-aged man, with amplifiers and a lightning-machine.
A couple of years ago Professor John Kenneth Galbraith, interviewed in London, confessed that 15 years before, his fellow economists were pretty sure they had all the answers. “Now,” said Professor Galbraith, "we know how much more there is to learn.” If there is much more for other cconomists to learn, we can reflect, a fortiori, how much there is left for Professor Galbraith to learn.
Here is the way Professor Laurence Tribe of the Harvard Law School frames his complaint. Let us agree, he says, that during the recent period Congress has tended to overspend, i.e., it has been politically fashionable to overspend. “But suppose,
he says, that tomorrow it became "equally fashionable" to underspend. There is, he insists, an argument against underspending, even as there is an argument against overspending. It is preposterous, he concludes, to lock the Constitution into an attitude in the matter which changes, and rightly so, with the social seasons. Just as it is wrong to spend so wildly as to bring on inflation, it is wrong to underspend when today's capital investment can yield a generation's profit.
This criticism of the proposed amendment, although theoretically appealing, is unrealistic. Unrealistic because economic husbandry, in a democratic society, is far less likely than economic profligacy.
The late Professor Wilhelm Roepke observed in a book published a generation ago that in the history of democratic government, no defeat of a political party can safely be attributed to public resentment of inflation.
It does not follow that economic sophistication might not give us the first exception to that rule. Even so, practical experience teaches us that the intensity with which an individual voter desires his particular benefit-whether social security, or high farm prices, or rent controls, or hospital care, or corporate protectionism, or educational benefits-tends, in the crunch, to outweigh the less specified brief against inflation.
But the principal reason for writing some kind of economic flywheel into the Constitution is precisely the power accumulated by Congress to bribe the states into prolonged submission. And here nobody has spok more eloquently than the nation's principal and most powerful wheeler-dealer, House Speaker Thomas P. O'Neill.
Asked what were the prospects of the states ratifying a tax-limitation amend. ment, he commented that a hard look at federal aid to the states would “drive them to their senses."
In other words, a state would finally fear to subscribe to a constitutional amendment after realizing that the resultant economies would mean an end to revenue sharing. We have here the ultimate cynicism: The state cannot afford to risk its own emancipation from federal overspending for fear that in doing so, it will lose that money which is collected by the federal government, mostly from that state's own taxpayers, and then remitted to that state.
The Constitution is based on broad philosophical assumptions, many of them, but not all, stated in the Declaration of Independence. It would appear that the tendency of democratic governments to practice economic policies that induce inflation is now sufficiently pronounced, over a long enough period of time, to justify explicit recognition in the Constitution. For this reason, it is unjustified to say that the proposed reform is a question of economic tinkering.