A Balancing Act
By Brett Dowling (Slow Thinker)
The United States federal debt is approaching $20 trillion at a breakneck pace, as politicians—Republicans and Democrats alike—continue to post massive budget deficits. There is currently no plan to return the budget to surplus, which is indeed a tall order given the annual deficit currently runs at around half a trillion dollars.
What has become clear is that structural budget deficits are not the result of ideology, but instead are a consequence of the structures of our political system. No matter the partisan affiliations of the President and the Congress, over the past 40 years only four surplus budgets have been passed. The inability of politicians to muster enough political will to pass a balanced budget—be it through tax increases or spending cuts—is reflective of political incentives that reward politicians spending (or cutting taxes) today for current voters regardless of whether adequate resources are presently available. However, because there are serious economic, and more importantly moral arguments against this sort of behavior, a constitutional amendment that prevents deficit spending during periods of economic growth is urgently required.
The economic rationale against consistent budget deficit spending is fairly straight-forward. To begin, government borrowing leads to the phenomenon of crowding out, in which government spending replaces more efficient private sector spending, resulting in a less desirable (and sustainable) allocation of resources in the macro-economy. Secondly, the interest payments required to service the national debt reduce our ability to implement the programs we desire. Net interest payments already hover at approximately 6 percent of the federal budget, or $223 billion, and that is within a regime of record-low interest rates. Considering our budget for non-defense discretionary spending only amounts to $585 billion, our net interest payment turns out to be quite a large sum of money that could be spent on much-needed programs today—if only previous generations spent within their limits. Instead, we may soon become trapped in a vicious cycle of indebtedness, borrowing to finance borrowing from times past.
The real problem with deficit spending is that it requires the federal government to accumulate debt. In other words, it requires the state of the current day to commit future generations of Americans to a (nearly) unbreakable contract that requires those future generations to foot the bill for decisions they had no part in making. This is perhaps the epitome of political injustice. Given that many of the individuals who will pay off the principal debts of present-day Americans will have had no vote or voice in deciding where, when, and how the money was spent (in fact many have not even been born yet), it is wrong to regularly commit them via the sale of long-term bonds to paying for the excesses of any prior generation.
What the government of the day representing the people of the day commits to should not be both burdensome and irreversible to future generations. Otherwise, as has occurred time and time again, politicians can easily score political points by borrowing—to fund tax cuts or spending hikes—on the backs of American who cannot yet vote or engage in the political process. In doing so, they kick the can down the road for their own present success. It should not be the right of the current voting generation—or any generation—to bind future generations to such commitments unless there is a significant competing case.
The Constitution is meant to move particular matters from the political sphere to the moral sphere, in order to ensure they remain immune to the political whims of the day. All Americans, and the governments they constitute, should have a right to complete liberty when it comes to economic and political decisions. Unfortunately, the costly contracts of bonds and other debt instruments sold by the federal government restricts each electorates ability to decide where it ought to place its own fiscal priorities, and enables certain governments to make commitments for future generations without that generation’s consent. Consequently, the right to this form of political freedom must be protected via a “balanced budget” constitutional amendment that requires the Congress to post budget surpluses.
A just “balanced budget” amendment, however, would only apply to fiscal years in which economic growth occurred. During recessions, there is significant economic evidence that suggests government intervention is necessary to buoy the economy, preventing a perpetual downward economic spiral and a significant decrease in standards of living. The immediate prospect of lost economic opportunity provides clear impetus to intervene under these rare and specific conditions, thus allowing a prudent balance between economic and moral arguments to be reached.
The full economic impact and political restrictions caused by our history of deficit spending will largely fall on us—the up-and-coming generation of millennials and generation z-ers. When principal payments become due and/or interest rates return to more historically-normal levels, increasingly we will find ourselves with less and less fiscal space to pursue the sorts of plans we value. Definitive action needs to be taken now to ensure the fiscal sustainability of our government and to ensure we provide the same sorts of political and economic liberty to future generations that were once taken for granted.
Here's how author Brett Dowling suggests you get involved: Join "Americans For a Balanced Budget Amendment"