Sunday, July 17, 2011

Balanced Budget Amendment Hurts Americans- Revise Free Trade Instead

You know, at first the idea of a balanced budget amendment to the US Constitution seems like a good idea, maybe even a cure all great idea that will end our debt issues for good. This is what small government Republicans want you to think. And, consequently, it is completely FALSE.

As near as I can tell, the purpose of this amendment would be to be a budgetary safety net during bad economic times. It would keep spending at or below revenue in times of low revenue.

Those words are key "in times of low revenue". It also needs to be stated that constitutional amendments supersede all laws .

So let us apply it to our federal budget today. We are in a place where revenue is much lower than expenditures. It seems that this kind of amendment would be helpful now right?


In balancing the budget currently, it is clear that cuts need to be made and/or revenue needs to be found. It is a mathematical certainty that to balance the budget (as required by our fictitious amendment) that one or both of these two things need to be done.

Let us start by looking at "raising revenue". In the short term, this can only be accomplished by raising taxes or selling assets. I think we would agree that selling assets is the shortest term solution we can come up with as it is finite in quantity. The United States did this historically with lands in the Western United States for a variety of reasons. But, it really isn't a viable long-term option. We can't make land to sell.

Raising taxes will also raise revenue if done correctly. But, raising taxes on the consumer will actually harm the economy further. We currently have an economic situation in this country where there is plenty of supply of goods and not enough demand for those goods. Taxing the middle and working classes will cause them to have less money to spend, causing the government's revenue to decline in other areas (corporate and small business tax revenue).

Taxes can be raised on the wealthy and on corporations. However we also run the risk of businesses fleeing the country or else sending jobs over seas if it is raised too high. In the short term this is bad, but in the long term it can be good, IF we as a nation revise our import tariffs.

In theory, free trade is the best thing we can have. HOWEVER, the table isn't balanced. So long as foreign nations have the ability to undercut American businesses, free trade agreements are a catastrophic failure. We need a free trade affirmative action plan to balance the tables. We need to raise prices on goods that are imported so that American companies can compete. Detractors will say that this makes things more expensive for Americans. It does. BUT, it also provides them with the quality income that they will use to pay for it by creating higher paying jobs in America. The way it is today, a lot of people can't afford what is imported either. They have no job. There is plenty of supply but no demand.

Getting back to the budget amendment, we have a second option in regards to our hypothetically existent balanced budget amendment, and that is to cut spending. So where do we cut spending exactly? We can end tax subsidies to companies that undercut American producers. That would be a very good idea. We could remove tax loop holes which allow corporations like GE to pay NOTHING in taxes while receiving BILLIONS in federal subsidies. This would help, but it wouldn't solve the entire problem and it wouldn't solve the immediate debt issue.

We need to balance the budget this year (in our hypothetical). We have several major expenditures that we can cut that will solve the remaining budget shortfall. Those include in alphabetical order: disaster aid (FEMA et. al.), education, federal law enforcement agencies (including the CIA, DEA, FBI, and TSA, etc.), Medicaid, Medicare, military spending, Social Security, and other similar sources.

The question is where are we most likely to cut funding? I contend that with our current Congress, funding is most likely to be cut ON SOCIAL PROGRAMS first, leaving a vast majority of federal agencies and military spending completely or essentially intact. I believe that a balanced budget amendment will FORCE GOVERNMENT TO SHRINK.

With a balanced budget amendment kiss the following programs goodbye: federal student loans, heating oil subsidies (for consumers), public school funding, Medicare, Medicaid, and Social Security payouts, food stamps, welfare funding, national parks, free and reduced school lunch and dozens more.

The wars will continue. Military spending will continue. Federal subsidies of corporations will continue. The American people will bear the brunt of this proposed amendment. WE WILL BE HURT AND CORPORATIONS WILL CONTINUE TO PROFIT.

There are other solutions, as I have mentioned above, we need to create a sort of affirmative action plan for free trade agreements that balances the table for us. This will bring jobs back to this country, bring consumption back to the middle and working classes (as they will have the money to do so again), and the government will return to a budget surplus as tax revenue will soar. With this extra money we can pay off our debts, protect our elderly, children, and under-served, AND leave this nation in a good economic condition for our children and our children's children.