THE BEST THING our government can do about inflation is to stop causing it.
For as many years as I am old, the federal government, regardless of party control, has indulged in the excess of unnecessary spending beyond its means, borrowing and printing the difference.
Politicians, even those dubbed "honorable" by election, like to say yes to as many spending requests from as many voting blocs as possible. And the opportunity to do so through deficits without having to ask for more taxes has become an overwhelming temptation in Washington.
Few seem immune from the temptation to outspend their resources. Sen. Jesse Helms, whose conservative credentials tend otherwise to be in order, somehow amassed an unprecedented $7 million for his North Carolina reelection last year. He managed to spend it all and then some, the sum of the deficit being $180,000. It seems even the brightest and best financed among us cannot summon the self-discipline to shun deficit.
Money, in order to be worthy of the name, must represent goods and services produced. The dollars our government prints pursuant to real productivity are real dollars. However, when our government runs out of places to borrow these days, it still takes out of the economy the goods and services it wants and pays the bills by the addictive practice of printing unearned dollars. It sophisticates the process by seeming to sell bonds which it quietly and immediately buys back with "money" created out of thin air by the Federal Reserve. Economists call this "monetizing the debt." At present $117.3 billion of the $800 billion national debt represents this latter-day alchemy. Alchemy never produced an ounce of gold. And a government printing press never produced a loaf of bread.
We need a constitutional amendment forbidding red ink in federal financing for the same reason we needed the first constitutional amendment forbidding congressional encroachment on freedom of speech: Sad experience had shown that day-to-day government could not be completely trusted when tempted to fatal excess.
Three years ago I authored the constitutional "Payment Book" amendment which would require Congress over a three-year weaning period to change its ways and live within its means. Thereafter, in 20 equal annual installments, Congress would be required to pay off the national debt. Under my amendment, government spending could exceed income only when the House and Senate, each by majorities of three-fourths, declared a national emergency. And in such an emergency one year's deficit could not exceed 10 percent and would have to be repaid within three years.
So far as I can tell, most of established authority is against the proposal and most of the logic is for it.
Critics of the amendment are sounding the alarm that it is not practical for the government to be constitutionally required to live within its means. They argue for voluntary surpluses in good years and deficits in bad years. But in practice they emulate the logic of the couple in which one spouse would make the little decisions and the other the nonexistent big ones. In four decades, according to bipartisan federal government planners, the "good years" have been nearly nonexistent.
Even in bad years the federal government could pay its bills legitimately if government planners followed their own advice and built surpluses in good years. Such was the wisdom of the British Keynes, who in essence simply echoed the Biblical Joseph.
Under a no-debt constitutional amendment, members of Congress would not be obliged to say "no" to worthy demands for necessary spending. But Congress could more easily resist the temptation to say "yes" to demands which exceed both actual need and available means.
The ill-defined term "balanced budget" does not appear in the "Payment Book" amendment. The appropriate passage is:
"...The total receipts of the government shall exceed outlays by an amount equal to five percentum of the federal indebtedness...."
"On" or "off" budget, an outlay is an outlay.
Thought might be given to a provision in the amendment limiting federal spending to a percentage of the gross national product. But consideration should also be given to the caveat that in political practice, a ceiling might also become a floor of excuse for spending beyond need, especially 20 years later when the government would be unburdened by teh $46 billion annual cost of interest on the national debt.
Would such an amendment be workable with the uncertainty of projecting government revenue from our federal income tax? The budget makers in the federal government rarely hit the nail on the head with regard to receipts or outlays.
When the budget overestimates outlays, the Congress routinely adopts resolutions of recession which cut back the spending. The same thing could be done under the "Payment Book" amendment for shortfalls in revenue, rescinding the spending on a democratically determined priority basis.
Consider the bonus from paying off the national debt by installments. Not only would we reduce government spending on loan interest by ever increasing billions each year, but instead of spending on Washington widgets we would be paying back about $44 billion annually to bond holders. Bond holders are investors who could be expected to put their $44 billion back to work in the private sector year by year. So much for capital shortage in the 1980s.
Dollars put back to work by investors mean multiplication of jobs for people to earn real productivity dollars, not bogus "pump priming" paper.
That last part is important. "Liberty," said FDR, "requires an opportunity to earn a living." Liberty also requires that the coin of the realm be worth something. Whether you get your dollars from profit, wages or welfare, it helps if they will buy something. Money talks. But when its value drops to a whisper, no one will listen to it; no one will work for it and no one will sell for it. And that means chaos, catastrophe and an end to democracy.
Such is not the province of some scary never-never land. The final act of inflation has been fascism in most republics where the people allowed governments to print their way to effortless prosperity. But even if the full force of that fate is reserved for our children to suffer, we ourselves have already begun to pay a terrible price for our gullibility. "In God We Trust." But how much trust do we or the rest of the world now have in the dollar that bears that motto?
We didn't really need the constitutional discipline of a "Payment Book" amendment when our Bill of Rights was adopted. But as a nation, we have chain-smoked our habit-forming deficits to the place where we now need the Amendment to preserve our Bill of Rights.
President Kennedy said, "The price of freedom is always high. But Americans have always been willing to pay that price." For the coming decade the price of freedom is the long road back from self-deception and debt to the ways of prudence and productivity.
I think it's worth the effort.