Wednesday, July 06, 2005

Are Deficits Immortal?

Can the U.S. Government Live Within Its Means?
Lessons From Abroad

Fine Study of the history of fiscal restraints, why they succeed when they do, and how they all fail eventually.

The rigid balance norm was superseded
after World War II by norms that allowed
budget aggregates to accommodate
cyclical changes in economic conditions.

Contemporary fiscal rules have branched
in two directions. One path assumes that
good budget outcomes depend on
preventing politicians from behaving in a
fiscally irresponsible manner; the other
assumes that favorable budget outcomes
depend on giving politicians incentives to
adopt responsible policies. The first ties
their hands, the second holds them politically
accountable for their actions.

The Later fiscal rules work about as well as One would expect, noting the tsunami nature of Government spending knowing Politicians are actually after more money--not Votes--and has to have the Government spend in order to get the Contributors to spend. Deficits cannot be cured with fiscal rules, and alteration of the political rules is the only way to reduce Government spending.

Things which can be realistically done to curb Government Spending and Deficits:

1) A Unitary Accounting system: Make Everyone play from the same Playbook, brings the ideal comparison network.
2) Forbid Politicians to raise Money (political contributions) during the actual Period of the Campaign. They have to make their Commitments prior to the Campaign to get the needed Funds, know they will be bound by those prior Commitments, and cannot gain any material support for any further Commitments.
3) Make the Politicians come up with a definable Budget. Pass a Constitutional amendment stating that at least half of the State Legislatures must approve any Budget before it goes into effect; otherwise, the existing Budget and budgeted amounts will stay in place through the following Budget Period. This approved Budget does not necessarily have to be passed by Congress, but simply provided by any major Political Party for three basic comparisons.
4) Establish a set size Extraordinary Expense Fund--the only source of Funds for Spendthrifts outside the Budget. When it is empty, so are the Politicians.
5) Tell the Federal Government and all State Governments We are tired of their acting like they are a Bank or Corporation. Treasuries and State bonds are forbotten! They are to get their funding from Commercial Bank paper like Everyone else. lgl

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