Gingrich, The Fed, And A Balanced Budget Amendment

Gingrich is certainly smart – but nowhere near as smart as he thinks he is. As is the case with Obama, Perry, and so many other candidates, he suffers from what Hayek called the fatal conceit. This is the belief that he is smarter than the marketplace and that he can allocate other peoples’ money more productively than they could do it themselves. Gingrich, like Obama, has great plans for investing your tax money and mine in high tech enterprizes that we are too unintelligent or shortsighted to voluntarily invest in. Gingrich’s choices are likely to be better than Obama’s, but that is not good enough. Just leave us alone. Invest only your own money, damn it!

You’ve got it right: spend less money.

We need a Spending and Taxing Limitation Constitutional Amendment, not a Balanced Budget Amendment!

A Spending and Taxing Limitation Amendment is very simple: A 2/3 vote of the whole number of each House shall be required for any appropriations, spending, loans, or guarantees, or to raise taxes. Counting votes is far easier than defining a balanced budget. The deficit exists as a consequence of it being too easy to spend money – so make it harder to do so.

Anyone who understands accounting knows that there is no precise universally accepted definition of a balanced budget. For example, how do you account for a Federal Reserve guarantee of a loan secured by credit default swaps on a particular tranch of mortgage backed securities? And that is a relatively simple example! (From 2008 through 2010, the Fed loaned and guaranteed $17 trillion dollars – all off the US government books: GAO Fed audit: http://www.gao.gov/new.items/d11696.pdf )

Here is a handbook on GAAP accounting: http://www.amazon.com/U-S-Master-Guide-Bruce-Pounder/dp/0808024094/  This book is currently 1,360 pages long and has to be updated every year because new financial products and deals are invented every year.

A Balanced Budget Amendment will inevitably give the power of the purse and taxation to the Supreme Court – bad idea. 2/3 supermajority – good idea.

Durk Pearson