Balanced Budget Amendment

The balanced budget amendment is a bad idea.

Consider the family that lives paycheck to paycheck.  Common sense states, do not spend more than you make.  Great advice, and I would recommend it to any family.  If you spend less than you make, guaranteed you will never file for bankruptcy. 

Great for families, good MICRO economics, bad MACRO economics.  Running a nation has a few other considerations ones have to consider.

Say we ratify the amendment that Congress can only spend what it takes in revenue.  Let us also say in March of any given year we are attacked by a foreign power and a declaration of war is needed.   Wars cost money, the fiscal year does not start until October, and the National Budget is set before March.   Therefore, legally, and constitutionally our response would have to be "Next fiscal year, you're going to regret this because we are going to war."

So we make a provision for acts of war.

Here's another scenario.  Let's say in February, we have an Earthquake the magnitude of what happened in Chile, or Haiti.  "Sorry San Fransisco, you need to wait until October to get your aide."

Now we have a provision for natural disasters.

Let's say come August we realize that our revenue projections were short and we are out of money (this happens all the time actually).  Do we shut the government down completely until October?  Do we stop all forms of welfare?  Do we halt defense spending completely?

So now you have a poor populace that depends on food stamps for food, that can no longer feed their families, and you expect to put down the resulting riots (people will do desperate things when they are hungry) with unpaid soldiers?

Now that I have outlined a few of the problems, let us deal with a few other issues.  One of the basic underlying principles of any government is to facilitate trade and economy.  Government must help control inflation/deflation and facilitate employment.  At times, they must inject money into the system (via spending) and at times they must take money from the system (via taxes).  A congress that cannot deficit spend cannot do their job. 

Am I implying that government should spend, spend spend?  No.  Spending must be decided on what will benefit the economy.  One tell tale sign of overspending is inflation.  Some inflation will happen naturally, regardless of government does. Spending too much will increase the supply of money, and the demand for it will fall, and that will destroy the economy. Currently our inflation rate is 1.5%, almost non existent.  Our unemployment rate is 9.1%.  Of the two, unemployment is the larger problem, and that is generally resolved via SPENDING(like the widely unpopular Stimulus bill of 2009).  Were the two numbers flipped, you would want to TAX.

The idea of the national debt being too high is a scare tactic used by politicians use to get elected.  Please see my above analogy.  My house cannot spend more than it makes, therefore the country cannot.  That is false.  That uses the economic logical fallacy of what works for one works for all.  As long as the Congress has the power to deficit spend and regulate commerce, we are fine.  If we take that power away, then we cripple ourselves. 

Lecture is over, now for me to get on my soapbox.

If you want a balanced budget (which some years is good) then Congress should propose one.  However, I feel that the failure of this amendment to be ratified will be used as an excuse by the Republican held House to not pass a balanced budget.  The tea party ran on cutting spending, but they never said where.  So I challenge you, Congress.  Put your money where your mouth is.  Pass a balanced budget this year, and then try to get re-elected.  Pass a balanced budget, but don't cut my government services(you can cut from the services my neighbor uses though), and don't raise my taxes, this is the cry of the tea party.  There is not reason to amend the Constitution.  If a balanced budget is the way to go, Congress already has spending power, they can pass one from year to year.