WHEN ECONOMISTS BECOME THE COURT MAGICIANS — PART 3

Several years ago I wrote Part 1 in this series. Because I could not figure out what I wanted to say, I had trouble getting the motivation to write Part 2, but I did.

What was the problem? Well, I am just an ordinary citizen. I don’t have much expertise in money matters. What could I say others have not already said better? Well, I finally solved that problem when I contemplated Our Kids Are Counting On Us by former Wisconsin governor Scott Walker. Now I have something to say.

What does Walker want to do? He wants an amendment to the Constitution that requires a balanced budget.

What is the problem with an amendment to balance the budget? It doesn’t address the problem.

When we solve a problem, we must first define the problem. Does this require any special expertise? Not in this instance.

Why are we having problems controlling our national debt? Why can’t we balance the Federal Budget? We are raiding the Federal treasury. We are stealing from each other. Pointing at a man grabbing a lady’s purse and yelling “thief” requires something, but not much expertise.

I suppose we do try to hide the truth from ourselves. We have a fancy phrase for raiding the Federal treasury. We call it “redistributing the wealth.” We call the programs the programs we use to redistribute the wealth “health, education, and welfare programs.” And what is most hilarious, the greatest self deceit? We identify the spending that the Constitution authorizes as “discretionary,” and we identify spending that the Constitution does not authorize as “mandatory.” Still, these rationalizations don’t actually fool anyone.

So why wouldn’t a balanced budget amendment to the Constitution help? While it is possible the Constitution could be improved, the problem with our thievery is in us, not the law. Do thieves steal because the law is broken or because they are corrupt? Well, we are stealing from the Federal treasury, and we are doing what thieves do. We are ignoring the law. We are pretending that we are just getting what we deserve.

So what would happen if we ratified a balanced budget amendment to the Constitution? Would a balanced budget amendment address the underlying problem, redistributing the wealth? No. The focus would be on the mechanics of balancing the budget. That’s equivalent to trying to cure alcoholism by redesigning bottles so drunks cannot open them. Drunkproof bottles might create some pathetic amusement, but bootleggers would find ways around those bottles, no matter how well designed.

Similarly, so long as we remain enslaved to the desire to redistribute the wealth of others to ourselves, bootlegging politicians will find ways to buy our votes with “other people’s money.”

Let me add, that only a virtuous people are capable of freedom. As nations become corrupt and vicious, they have more need of masters. — Benjamin Franklin (letter to the Abbés Chalut and Arnaud (17 April 1787) (from here (en.m.wikiquote.org))

12 thoughts on “WHEN ECONOMISTS BECOME THE COURT MAGICIANS — PART 3

  1. I’m not really educated enough to comment much on the topic.
    But per fiat currency, I do know that if a government goes on the gold/silver standard, it can go off it just as easily. The fact a piece of paper says it’s backed by gold or silver doesn’t ipso facto make it so, since the government can just as easily decide it isn’t. The Confederate states would be a case in point, though I’m sure there are other better examples.
    Also, when the metaphorical crap really hits the fan, folks do go back to the barter system. See Greece. It’s just a comparatively inefficient way to do business.
    And finally, I think easy credit has obviously had an impact on our financial stability. I lived in Vegas during the upside of the housing bubble and saw it first hand (my dog could’ve probably gotten a home loan).

    Liked by 1 person

  2. Tom,

    Used you Benjamin Franklin quote and post in a post what needs to be done it pay down the National Debt, in my opinion,

    virtue is behavior showing high moral standards.

    Best way to get people involved in government is to make everyone morally and economically share the burdens of government instead of the belief that someone else should pay the costs of government. decisions.

    https://rudymartinka.com/2019/04/02/king-solomon-deserving-of-leaders/

    Regards and good will blogging.

    .

    Like

  3. Hamilton. “Debt equals prosperity” in the US started with Alexander Hamilton. Although he was never elected to anything, he was Washington’s “Grim’a”. A Wormwood who spoke lies into his ears and turned our fledgling nation on the path to insolvency.
    The last, and only, president ever…EVER… to pay off the national debt was the Iconoclast Andrew Jackson. His refusal to reinstate the National Central Bank was the premise for England to attack us in 1812 and try to regain control over the New Nation that had fought hard for national and financial freedom from the British.
    Didn’t take long but they finally did regain it. And we’ve been slaves to the Fed and International Bankers ever since.

    Liked by 1 person

    1. @grabaspine

      I am not sure how much we agree or disagree. Probably more agreement than not.

      I am not either a big fan of or a big critic of Alexander Hamilton. Liberal Democrats have sort of adopted Hamilton as one of their own, but I just think that’s an indication of how much we can twist history. How much of what we have concocted looks like what Hamilton proposed?

      Just how much should our government be involved in banking? Not much, but there are occasions when our government has to borrow money. In Hamilton’s day and today, that was wartime. War bonds.

      The headache with modern banking is the inherent instability of fractional reserve banking. Without government involvement, people can panic and start a bank run. Because of government support, we don’t see many bank runs these days. Unfortunately, we have increased the risk. The Great Recession provided an example with the subprime loan scandal. Because it is not their money, politicians are too ready to loan money to people with bad credit. Buys votes.

      That stupidity risks the entire economy. When politicians tell bankers how to run their businesses and back their loans with our money, we risk the credit worthiness of the USA, not just a bank or two.

      Since politicians cannot be trusted, I want our government to stay out of that business. Regulation is enough. Unfortunately, thanks to fiat money, I suspect disentanglement will be complicated.

      Liked by 1 person

  4. I was a certified financial planner, but the best course I ever took in money was Biblical Stewardship. A steward manages the money entrusted to him for the owner’s benefit. Are we stewards of God’s money, or owners? If God owns the “cattle on a thousand hills” i.e. everything, He owns it all. We are all stewards, not owners. In the secular sense, the federal and state governments should be stewards of the taxpayers’ money, but they steal it for votes, and the Federal Reserve issues IOU’s (look on any paper currency, it says at the top “Federal Reserve Note’. A note is a debt) instead of actual value. From 1878 to 1964 our paper money said “Silver Certificate). It was redeemable for silver. Now, any silver certificates left in circulation are only redeemable for Federal Reserve Notes. In other words, after 1964, money became debt IOU’s rather than a store of value.

    Liked by 2 people

    1. @iamcurmudgeon

      Consider this irony. Federal Reserve notes have no intrinsic value. So why do people want them? Habit? Not really. We pay our taxes with Federal Reserve notes. Since we have to have fiat money to pay our taxes, that makes fiat money worh something. In fact, the higher our taxes, the money the money is worth. Of course, that is true only so long as people can and are willing to pay their taxes.

      Liked by 1 person

        1. @iamcurmudgeon

          The legal tender law may require merchants to accept the notes, but I think that law still allow merchants still to set their prices. If runaway currency inflation ever sets in, merchants will undoubtedly prefer gold coins to worthless $10,000 bills. Yet I suppose some clown will demand that some merchant accept his $10,000 dollars instead of a gold coin of “lessor value.”

          There is an interesting thing about laws. With few exceptions, they only work when the vast majority wants to obey.

          What are the exceptions? Those are laws that require a small number of people to obey them at any one time. If that small number can be readily identified, segregated and sufficiently threatened, they have a problem. Half of a population can be enslaved that way.

          Liked by 1 person

  5. I am not sure a thing you’ve stated here is accurate. You’re trying to assign some moral constraint onto fiscal performance. “Corrupt”. or being corrupt, has nothing to do with the legal process of applying spending and managing debt. You can define the action of doing that as having a political opinion in it being a morally corrupt process, but even that seems kinda abstract to your reasoning.

    You said…
    “Do thieves steal because the law is broken or because they are corrupt? Well, we are stealing from the Federal treasury, and we are doing what thieves do. We are ignoring the law. We are pretending that we are just getting what we deserve.”

    I dunno, Tom.. that kinda falls near the “WTF?” category. Thieves break the law.. which makes them thieves… hence displaying a moral corruption. They typically steal for personal gain, not to BE corrupt. So not sure what this even means.
    Second, who exactly is “stealing” from the Federal treasury? Fiscal responsibility falls to Congress and money goes where it goes. Who is ignoring a law here? More to the point, what law is being ignored? Who is pretending anything?

    Like

    1. @Doug

      1. What do you think redistributing the wealth means?
      2. The Constitution is a charter. When the Constitution was ratified by the states, the states authorized the Federal Government to do certain things. Which health, education, and welfare programs does the Constitution authorize?

      Like

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