Let the States Roar, by Stephen MacLean
The significance of States’ Rights for fiscal probity
Notice is given from its ‘Constitutional Affairs’ department that ‘The New York Sun . . opposes a balanced budget amendment.’
The justification cannot be that The Sun favours deficit spending, for the broadsheet prides itself as a tribune for limited government, fiscal probity, and sound money — grounded on the Gold Standard.
An awareness of the speed of unforeseen circumstances is one likely scenario for the editorial stance: allowing for contingency language written into a balanced budget amendment to take into account war or domestic necessity requiring its temporary suspension, The Sun may reason that even such foresight would frustrate government efficacy.
This observer can only speculate. But one germane objection to a constitutionally mandated balanced budget arises in relation to criticism of the supply-side economic revolution of the 1980s. While true that lowering high marginal tax rates can increase government revenues — the famous Laffer Curve axiom — such tax reform itself is not conclusive of prudent government policy. No responsible tax proposal comes without its corollaries: limited government and budgetary restraint.
Ronald Reagan’s presidency was transformative for its approach to revenue enhancement, but Reaganomics suffered from an inability to rein in spending, due in part to its Cold War strategy of ‘peace through strength’ by intimidating the Soviet bear with U.S. weapon superiority.
Placating Democrats was another Achilles’ heel for balanced budgets, since the GOP administration logrolling greased tax-cutting legislation through Congress by promising the opposition enhanced welfare schemes.
This imbalance was a source of irony for Austrian School economist Murray Rothbard. ‘If taxes and government spending are both slashed, then the salutary result will be to lower the parasitic burden of government taxes and spending upon the productive activities of the private sector,’ he wrote. But in the 1980s, that was not on the Washington agenda. And he added,
To the extent that supply-siders point out that tax reductions will stimulate work, thrift, and productivity, then they are simply underlining truths long known to classical and to Austrian economics. But one problem is that supply-siders, while calling for large income-tax cuts, advocate keeping up the current level of government expenditures, so that the burden of shifting resources from productive private to wasteful government spending will still continue.
Perhaps The Sun has been illuminated by an earlier president, Calvin Coolidge, who made his name for both tax cuts and budgetary restraint. No-nonsense Coolidge told a meeting of businessmen in June 1924, ‘I am for economy. After that I am for more economy. At this time and under present conditions that is my conception of serving all the people.’
Such discipline became the overriding objective of the Coolidge administration. Presidential biographer Amity Shlaes notes the President’s insistence,
While I am exceedingly interested in having tax reduction . . . it can only be brought about as a result of economy,” [Coolidge] said at one point. He would not put tax cuts before budget reduction, insisting on twinning the two goals. To underscore the point, twin lion cubs given to Coolidge by the mayor of Johannesburg were named “Budget Bureau” and “Tax Reduction”.
Shlaes is wise to this budgetary failing of the Reagan presidency — ‘the federal budget rose by over a third during his administration’ — and, like Rothbard, she realises the moral ambiguity of increased revenues: ‘Coolidge didn’t favor tax cuts as a means to increase revenue or to buy off Democrats. He favored them because they took government, the people’s servant, out of the way of the people.’
Doubtless The Sun (and other naysayers) takes a stand against a balanced budget amendment due to the nature of contemporary politics that is addicted to ever more taxes. Establishment Democrats and Republicans are hostile to the simple wage-earner, whether this person be employer or employee. Market capitalism has been superseded by crony capitalism, wealth creation by wealth redistribution. In this light, balanced budgets are achieved not by decreasing spending but by increasing taxes that hits all strata of the population, regardless of soak-the-rich rhetoric.
As of this writing, American indebtedness beggars belief: federal debt, for which Treasury obligations are presently outstanding, nears $20 trillion (nearly 105 per cent of GDP); while total U.S. debt exceeds $66 trillion when the present value of long-term, unfunded federal liabilities are included — altogether, in the lifespan of these obligations, more than $100 trillion. The scale of debt is incomprehensible; the paucity of credible attempts to address it, unforgiveable.
So what to do? Three remedies spring to mind:
First, greater scrutiny of Washington expenditure, by adhering to the limited, enumerated powers granted to Congress by the Constitution, and by enforcing the prerogatives of the States and individuals as set out in the Tenth Amendment.
Second, enacting legislation — perhaps as an additional clause to the balanced budget amendment — to limit taxing to 20 per cent of GDP, the nominal figure at which Laffer/Rahn Curve proponents argue government revenues are maximised.
An inherent problem with both remedies is that, in the words of James Madison, they are but ‘parchment barriers against the encroaching spirit of power . . .’ What is necessary, according to the Federalist Papers co-author, is that ‘ambition must be made to counteract ambition.’ And the answer lies with a third remedy: the States.
The Union, after all, was a compact of the States, pooling their collected strength in matters of general interest – primarily promoting external security and dismantling internal trade barriers — while retaining sovereignty in domestic affairs (as reaffirmed in the Tenth Amendment). Were the resulting general government to overstep constitutional limitations, it was within the authority of the States to nullify said legislation.
Such was the impetus behind the Principles of ’98 as formulated by Jefferson and Madison, and practised in antebellum America by southern States against punitive tariffs and by northern States in opposition to slavery.
Many mistakenly see in nullification the route to secession. Not so. John C. Calhoun was a most vocal defender of States’ rights, which he argued were the final defence of the Union. ‘We have thus direct and strong proof that, in the opinion of the Convention [of 1787], the States, unless deprived of it, possess the veto power — or, what is another name for the same thing, the right of nullification,’ Calhoun informed the Senate in February 1833. ‘I know that there is a diversity of opinion among the friends of State Rights in regard to this power, which I regret, as I cannot but consider it as a power essential to the protection of the minor and local interests of the community, and the liberty and the union of the country.’
From his perspective, State ‘interposition’ between the Constitution and ultra vires federal legislation was the very antithesis of a radical departure from the status quo. ‘I am a conservative in its broadest and fullest sense, and such I shall ever remain, unless, indeed, the Government shall become so corrupt and disordered, that nothing short of revolution can reform it,’ Calhoun professed to the Senate in January 1837 (emphasis in original). Again,
I believe that in the rights of the States are to be found the only effectual means of checking the over-action of this Government; to resist its tendency to concentrate all power here, and to prevent a departure from the constitution; or, in case of one, to restore the Government to its original simplicity and purity. State interposition, or, to express it more fully, the right of a State to interpose her sovereign voice as one of the parties to our constitutional compact, against the encroachments of this Government, is the only means of sufficient potency to effect all this; and I am, therefore, its advocate.
No strict guidelines exist about how interposition would work in practice. For Calhoun, though, the procedure was clear: ‘But I rest the right of a State to judge of the extent of its reserved powers, in the last resort, on higher grounds — that the constitution is a compact, to which the States are parties in their sovereign capacity,’ he explained to the Senate back in 1833; ‘and that, as in all other cases of compact between parties having no common umpire, each has a right to judge for itself.’
Too far-fetched? Not when viewed through the prism of the American Legislative Exchange Council, which chronicles the migration from high-tax States to those with low (or no) income-tax burden. In the past ten years, ALEC reports, ‘those states with no income tax saw their population rise 109 percent faster than their high-tax counterparts.’ The 2016 Competitive Index records this migration to States like Texas (1st) and Florida (2nd) from California (49th) and New York (50th), corroborating that Americans are voting with their feet.
To these low-tax jurisdictions Americans will turn, both for personal well-being and for protection from Washington; these States will be in the vanguard of holding Congress to account — many already standing up for their constitutional responsibilities.
All these are reasons enough for The Sun and others to have qualms about putting their faith solely in a balanced budget amendment.1 Legislative checks-and-balances have their place, but the fourth pillar of the American governing edifice has a unique opportunity by virtue of anteceding and authoring the federal compact. To the States, tax-weary citizens must turn in the last resort and as the last refuge for their rights and liberties.
1 Curiosity compelled me to see if any other Sun reader was prompted to make inquiries about its editorial position on a balanced budget amendment; fortunately, the question was posed and thus answered: ‘The Sun favors monetary reform, the return to a dollar defined as a specified weight of gold. Once that is in place the indefinite budget deficits that seem to have become the norm would not be possible. It is a better method of achieving the same result. The balanced budget amendment would be an incentive for the Congress to raise taxes.’
Stephen MacLean maintains the weblog The Organic Tory.
E-mail him at: email@example.com