The first success of the movement for a balanced-budget amendment has been to open debate about the conduct of governement finances to popular participation. Now that 29 legislatures, of a needed 34, have called for a limited constitutional convention for the sole purpose of outlawing incessant deficit spending, leaders in Congress and other supporters of the prevailing orthodoxy have no choice but to defend their position.
That will prove more difficult than they suspect. They have not been prepared by recent experience to argue the case that deficit spending is beneficial. Now that they must do so, they will find that the arguments of 50 years ago, upon which the Washington spending consensus depends, no longer carry the weight of conviction. The feeling in Washington has been that the public cannot be relied on to comprehend complex issues, so politicians are obliged to do what they know is best while deceiving or mollifying the public as to the fiscal consequences.
Such an attitude leads the politicians to deceive themselves as well as their constituents. By pretending to seek balanced budgets while chronically failing to do so, they have suppressed or ignored the true reasons for far-reaching policy decisions. Thus they have trivialized their own thinking.
This is evident from the responses which have been forthcoming now that the defenders of deficit spending have been moved at a frantic speed to prepare their case. They could have entered the argument long ago. They did not, perhaps in hope that by ignoring the movement for a balanced budget they could make it go away. Since this has not happened, and the call for a limited constitutional convention is nearing success, the public is finally hearing the best arguments for deficits, along with an incredible variety of alarms about every aspect of the spending-reform movement. At this stage, readers of The Washington Post are well aware of many arguments which allegedly make it useless, dangerous or impossible to balance the budget. Unfortunately, there is not room at this writing to fully answer all of the objections. An attentive citizen would note, however, that the opponents refute many of their own points by arguing at cross-purposes. They claim, for example, that the budget cannot be balanced because the Congress lacks the forward vision to project revenue and expenditure accurately. With the next breath, they claim that the same congressmen, who lack the foresight to do their sums, can predict when the economy will fall into a tailspin and need the fiscal tools to "fine tune" the economy. That is like saying that someone who is too blind to wield an axe should be trusted as a surgeon.
The efficiency of debt in stimulating the economy is already declining markedly through over-use, as a recent Solomon Brothers study confirms. Beyond that, when the budget is in balance there is no necessity that control of the money supply be tied to fiscal policy. The Federal Reserve Board has the power to regulate the money supply without a growth of government debt.
You also have heard that a convention, once convened, would celevrate a sort of witches' Sabbath by "dismantling" the Constitution (accordin to Sen. Kennedy), repealing the Bill of Rights, and, as one writer in The Washington Post recently charged, unleashing "conflicts that would make the other political crises since the Civil War look puny."
We invite anyone who has been persuaded by these alarms to consider a more sober interpretation. Not only is it highly unlikely that a convention could get out of hand, but there are also actually more checks upon an amendment emerging from a convention than is the case with a congressionally proposed amendment.
If the convention decided to turn America into the Land of Oz, any amendment it proposed would not only have to be ratified by 38 states. It would also be subject, as congressionally initiated amendments are not, to review in the courts for having strayed beyond the call. The sum of these considerations is such that a reasonable observe would have no more basis to object to a consititutional convention than to the Congress itself. It is effectively sitting as a perpetual convention whose constitutional deliverations are neither limited nor subject to court review. And our view fo the matter is hardly idiosyncratic. The deans of Harvard Law School and The University of Chicago Law School; the American Bar Association, former senator Sam Ervin and many other constitutional experts conclude that the convention route can be a safe, limited, method of proposing specific amendments.
The true significance of a convention call to balance the budget and its true danger from the point of view of Congress, is not that it would do something preposterous but that it is a repudiatin of the current way of doing business. If our movement should succeed it would be, as The Wall Street Journal said, "a colossal vote of no-confidence in the United States Congress. The people would be saying that they have finally decided that Congress can't be trusted with money."
That is exactly the point. There really is difference between the career interests of congressmen and the public interest. As everyone who is alert to politics knows, the first commiment of most politicians is to themselves. Beyond everything else, most congressmen wish to be re-elected. As a matter of pure logic, they imporve their chances by resorting to deficit spending. It enables them to make the benefits of increased spending immediately evident to special constituencies while disguising the costs in the form of borrowing and inflation which are diffused over large numbers of the rest of society. Under such conditions, the incentive of the politicians clearly point toward ever-increasing spending with continued inflationary deficits.
Even the classic Keynesian formulation of deficits in lean years and surpluses in good years has proven impossible to follow in practice. The corollary to the defictis, the off-setting surpluses, can never be achieved because they involve making the political costs of the budget more evident than the benefits. Thus, since 1969. the dollar total of defictis over the one suplus has been at a ratio of 100 to 1. This does not reflect "flexibility needed to deal with changing economic conditions," as proponents of unfettered spending propose. It reflects the degeneration of the system because of perverse incentives which lead individual congressmen to make spending decisions which are favorable to their career interests but bad for the public.
Furthermore, as Edward R. Tufte has documented in his book, "Political Control of the Economy," the ups and downs of the economy which politicians claim unfettered deficit spending is needed to counter, are at least partly caused by political manipulation in the first place. In addition to the business cycle (which may be ultimately caused by expansion of the money supply), we must consider the "electoral-economic cycle" which is clearly caused by politicians seeking to heat up the economy prior to elections.
A balanced-budget amendment would have other good consequences beyond merely making government more accountable. A balanced budget would reduce "crowding out." Whem deficit spending leads government to borrow massive amounts of money, it soaks up available capital, raising interest rates and reducing stock prices. A balanced budget would lower borrowing costs throughout the economy, stimulation investment, raising stock prices and promoting faster real growth.
Furthermore, an end to deficit spending would lead to less waste of resources by government. Currently, much wasteful spending is excused because it is considered part of a needed "stimulus for the economy." Without a balanced-budget requirement as a check on federal spending, Congress rarely asks, "Is this program worthwhile, or is it the best use of the taxpayers' money, or should we reduce taxes?" As Otto Eckstein puts it: "If the political process must levy the taxes to pay for the expenditures, there is likely to be a more careful scrutiny than if the expenditures can be clothed in the virtue of deficit-creating stimulus packages."
Beyond all these consideration is the greater good -- the almost universally acknowledged fact that balancing the budget would reduce inflation. That is something we must do, not merely to save money but to preserve the civic virtues of democracy. These cannot be maintained through long-protracted inflation. The experience of many countries proves this.
As Thomas Mann wrote: "There is neither system nor justice in the expropriation and redistrbution of property resulting from inflation. A cynial 'each man for himself' becomes the rule of life." Under such conditions when the majority is deprived, defrauded, and frightened, politics can take frightening turns. We dare not attempt to prove that America wuld be an exception to the rule that protracted inflation weakens and eventually destroys free institutions.
That is why we must heed the advice of responsible people of all parties, and enact a constitutional amendment outlawing inflationary deficit spending.