Balanced Budget Amendment

Circumstance has forced my hand
To be a cut price person in a low budget land
--The Kinks

Think recent talk of a balanced budget amendment is a recent phenomenon perhaps linked to the Tea Party movement? Nope. Murray Rothbard discusses the pros and cons of the amendment as it gathered steam in the late 1970s.

While intuitively desirable, there are a number of negatives. Politicians may create loopholes that facilitate chronic evasion of the law. Moreover, it is possible that a balanced budget amendment could be balanced up, by increasing taxes to cover bloated spending, rather than down. Finally, the Fed can facilitate the transfer of wealth via inflation regardless of whether the budget is balanced.

Rothbard astutely observes that the real problem here is government spending, and that the real solution to this problem is to take away government access to resources. Specifically, this means that access to tax revenues and the monetary printing press must be denied. We have noted precisely this a few times in these pages.

As Rothbard notes, a balanced budget amendment is a well intentioned step in the direction of liberty. But it is likely to have minimal impact without measures that directly strip the federal government of capacity for confiscating wealth.