Walter Williams: A better idea than a balanced-budget amendment
Some people have called for a balanced-budget amendment to our Constitution as a means of reining in big-spending Congress. That's a misguided vision. In any real economic sense, as opposed to an accounting sense, the federal budget is always balanced. The value of what we produced in 2017 — our gross domestic product — totaled about $19 trillion. If Congress spent $4 trillion of the $19 trillion that we produced, you know that Congress must force us to privately spend $4 trillion less.
Taxing us is one way Congress can do that. But federal revenue estimates for 2017 are about $3.5 trillion, leaving an accounting deficit of about $500 billion. So, taxes are not enough to cover Congress' spending.
Another way Congress can get us to privately spend less is to enter the bond market. It can borrow. Borrowing forces us to privately spend less, drives up interest rates and crowds out private investment. Finally, the most dishonest way to get us to spend less is to inflate our currency. Higher prices for goods and services reduce our real spending.
The bottom line is the federal budget is always balanced in any real economic sense. For those enamored of a balanced-budget amendment, think about the following: Would we have greater personal liberty under a balanced federal budget with Congress spending $4 trillion and taxing us $4 trillion, or under an unbalanced federal budget with Congress spending $2 trillion and taxing us $1 trillion? I'd prefer the unbalanced budget. The true measure of government's impact on our lives is government's spending, not taxing.
Tax revenue is not our problem. The federal government has collected nearly 20 percent of GDP almost every year since 1960. Federal spending has exceeded 20 percent of GDP for most of that period. Because federal spending is the problem, that's where our focus should be.
Cutting spending is politically challenging. Every spending constituency sees what it gets from government as vital. It's easy for members of Congress to say “yes” to these spending constituencies, because whether it's Democrats or Republicans in control, they don't face a hard-and-fast bottom line.
The nation needs a constitutional amendment that limits congressional spending to a fixed fraction, say 20 percent, of GDP. It might stipulate that the limit could be exceeded only if the president declared a state of emergency and two-thirds of both houses of Congress voted to approve the spending.
During the early '80s, I was a member of the National Tax Limitation Committee. The committee included its founder, Lew Uhler, plus notables such as Milton Friedman, Robert Bork and James Buchanan. The Senate passed our proposed balanced-budget/spending-limitation amendment to the U.S. Constitution on Aug. 4, 1982, by a bipartisan vote of 69-31. In the House of Representatives, the amendment was approved by a bipartisan majority (236-187), but it did not meet the two-thirds vote required by Article V of the Constitution.
During an interview about the proposed amendment, a reporter asked why I disagreed with the committee and called for a federal spending limit of 10 percent of GDP. I told him that if 10 percent is good enough for the Baptist church, it ought to be good enough for the U.S. Congress.
Walter Williams is a professor of economics at George Mason University.