Constitutional amendment to limit spending
A possible reform to keep down government spending is a constitutional amendment freezing all yearly spending at a certain amount. If the amount was an inflation adjusted $X per year, this would force the government to prioritise spending within a certain bound. The advantage of a constitutional spending limitation is that it places a cap on the expansion of government.
It might be achievable in those states where the constitution can be amended by simple legislative majority. At the federal level however, it would be more difficult to achieve.
For sure, arguing for a constitutional amendment is hopelessly idealistic. If every budget included no new spending, how would politicians ‘bring home the bacon’ to bribe their constituents? Politicians would be forced to shuffle the same amount between different public services each year.
On the other hand, pushing for this reform could lead to some interesting debate about what an appropriate capped amount is. Is it $100 billion? $200 billion? Maybe $300 billion? How much does a government really need to spend in order to perform its core functions?
Sukrit,
interesting idea. But founders as do most black letter law solutions on the problem of the judiciary. The most blatant example is the clause in the Oz constitution demanding trial by jury for indicable offenses. In the 1930’s the Commonwealth simply renamed the indictment a ‘presentment’ and seriously proposed to the High Court that serious cases started with a ‘presentment’ were not covered. The High Court held that the Commonwealth was onto a good idea. So we have no practical right to a jury trial two notable figures (one left, one right) dissenting.
Unless their is a culture of liberty and respect for legislative and constitutional intention then the amendment you suggest, and the Bill of Rights many others propose are simply not worth the effort.
I agree with you Tim… I’m opposed to using constitutions as a policy tool because that would give even more power to unelected judges to force their vision of society upon the rest of us. America has probably the worst human rights record of any Western nation in spite of a Bill of Rights.
I was just throwing the idea of a constitutional spending limitation out there because I read it in Milton Friedman’s book.
Still getting your name in the papers, I see, Sukrit! I read your letter in the Australian. Well done!
As for limiting spending, I doubt if any government would put up with it. Didn’t Whitlam (or was it Rex Connor?) try to borrow from overseas, to get around budget limitations? They’ll always look for a way around it.
Nicholas,
yes they were trying to get around loan council approval by describing the twenty year loan as a short term cash requirement. Check ‘The Dismissal’ by Paul Kelly for a full account.
As for Friedmans idea, at least there was a struggle regarding the letter of the US constitution - it took 60-100 ytears to pick large holes in that. Ours was very sick from the Engineers Case in the 1920’s - i.e. two decades from birth to senility.
For a middle power like us it ought to be a non-defense limit. Since to avoid war or having politicians bid away our liberty or strategic position we would sometimes want to have a quick buildup in defense spending. Spending into a state of readiness can be a good alternative to actually going to war.
I don’t see why we cannot limit non-defense spending in nominal daily dollars to whatever the amount is when we can get the limit whacked on. Right there blood-sucker-land has a built-in incentive to go for a growth-deflation monetary policy in order to increase their thieving limit in real terms.
On the other hand it ought not be thought of as both a minimum and a maximum. It ought to be thought of as a maximum only and the government who set the limit might hopefully start spending well less then that from within a month of setting that limit.
If there were an escape clause to exceed that limit… such as for some sort of national disaster, it might be that you could only exceed it for 3 months maximum and even to do that you might need a 90% vote or something like that.
Thats the other thing. To avoid these loopholes we want to stop government departments from borrowing on every level. If government services are so very vital they ought to be paid for out of tax revenues. This ability to borrow is like budget amphetimine. Its locking people in to pay it back after those thieves that borrowed the money are safely retired on a massively generous pension.
There’s a chance that if the state and local governments didn’t borrow at all we might turn our trade deficit around.
Capping government spending is absurd, the cap would have to be so high so as to address possible contingencies that the cap would become meaningless. It is like trying to cap greed, human nature just won’t allow it.
As to the idea that government spending is responsible for our trade deficit. Please … . The trade deficit is just something for economist types to wax lyrical about. It don’t matter except the theoreticqal ideas of some peoples’economics. Government debt is the real problem, the trade deficit don’t bother me.
Well I almost agree 100% with that John. The reason is, the Government will generally set the cap so high that any reform wiould be meaningless. “Contingencies”, what contingencies?
Colorado actually has some type of limit.
http://en.wikipedia.org/wiki/Taxpayer_Bill_of_Rights
Argue on, friends.
You are right about the trade deficit. It really doesn’t matter. It is a consequence of policy and factor endowments. It is the policies that matter, since they (may) have other adverse outcomes.
Graeme is on his Quixotic crusade against the symptom and not the disease.
Hakensam. Thats why I suggested capping NON-DEFENSE spending. Whats absurd about it? What contingencies?
Yes it is the symptom of bad policy. But you guys are making a fundamental mistake here. One that Mark has made 1000 times already and will make another thousand times because of his mental constipation problem.
It is a myth that trade deficits are not a problem. A particularly stupid myth because the logical fallacy it rests on is so blatant.
The anti-reasoning goes like this:
1. Under a free market trade deficits would not be a problem.
2. Therefore trade deficits caused by interventionism aren’t a problem.
Now clearly this is a logical fallacy. But Mark continues to fall for this logical fallacy and probably will again next month.
It makes no difference how unworried you are about this trade deficit. Its bad news to be having policies which create them independent of your anxieties or lack thereof.
This is a big problem I think with policy more generally. Folks imagine that things are just fine just so long as they personally aren’t having an anxiety attack. These nervous types then go about projecting their shakiness onto other people who are advocating good policy.
I’ve seen this sort of thing time and time again.
We are a rich country and we ought to run surpluses in peace so that we can afford to run deficits in war. Its only our monetary/tax system that prevents this.
This is another of these arguments I keep having with the resident neoclassicals but they never come up with anything since their position is an irrational tribal position.
Their irrational tribal position is that if trade deficits are fine in some contexts they must be fine in ALL contexts. And that if attempting to end trade deficits via trade barriers is a bad thing then trying to end them by other means is ALSO a bad thing.
Now we ought to see that this tribal position is based on logical mistakes and nothing else.
Graeme thinks markets reacting to relative price changes is a bad thing. The economics profession disgarees.
His “anti-reasoning” continues in that he needs no proof that a deficit is bad, because he has shown a deficit caused by inflation isn’t necessarily good. Why not just proclaim you’ve proven pi is exactly three, because you have just as much proof.
The trade balance makes up a small part of the Australian balance of payments, and developmental theory suggests that nations actually require a large BOP deficit on their path to income equalisation with leading economies.
Come on folks, what about TABOR?
Mark, why don’t we just declare that Pi IS three? Wouldn’t that be more convenient all round? After all, science and Maths are social constructs, and thus amenable to social control.
Q. How many masturbators does it take to change a light bulb?
A. What!? The light bulb went out? That’s a relief! I thought I’d gone blind!
The cap would be good if it was in the constitution, and the courts did a half decent job of enforcing it.
That way when the tax-eaters try to boost spending in the event of some disaster, like tsunami, drought, hot weather, cold weather, floods, hurricanes etc, they will actually find a serious obstacle to their dreams of unlimited government spending.
As for the question, how much money is enough money for the government to spend, the answer is pretty low. The gov’t spends over $200bil, half of it goes to Centrelink. So without Centrelink, we could still pay for all sorts of frills like the ABC, health, schools, universities, roads, defence, police, courts and could keep it under $100bil.
Lets go over this again. Eventually Mark will get it but we all may be very old before he does.
Under a theoretical free market, including no company income tax and a growth-deflation monetary system…. Under this scenario a balance of trade deficit would never be a problem.
Supposing we found that our Antarctic territories were rife with oil wells right at the surface like Saudi Arabia and Texas had been.
Immediately we would be running a trade deficit and one that would develop all of our Antarctic resources.
In this case the deficit cannot be bad. And its a deficit that WILL LEAD TO SURPLUSES DOWN THE TRACK.
We can see that under free enterprise deficits do not just hang around year after year. Rather they are the fuel to massive growth and they are the cause of their own recriprocal surplus.
Now we must simply keep going over the logical mistake Mark is making again and again and again until he admits he is wrong.
Mark is in effect saying that if a deficit is a good or neutral thing IN SOME CONTEXTS it must be a good or neutral thing IN EVERY CONTEXT.
Mark has never even attempted to justify this logical fallacy.
This economic error that Mark is displaying has been produced by networked bullshit momentum within the profession.
Economists spend a great deal of time explaining to the laity why trade barriers are a disaster. In doing so they often find reasons to tell them that trade deficits aren’t a bad thing. And this momentum accumulates and its now accumulated into total mindlessness as you will find that no matter how you grill Mark on this subject he will never find a way of overcoming his totally obvious logical fallacy.
Graeme, why is a trade deficit a “bad thing”?
I prefer my idea on taxes: a 20% GST and no other taxes, and the tax/GDP ratio cannot be increased, if it does the tax rate must fall.
You can have this as a legislative policy as well as a constitutional reform goal.