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Why not a balanced budget amendment to the US Constitution – what is the objection?

Posted in Political/Social Commentary with tags , , , , , , on August 10, 2011 by The Center Shot

For just a minute, try and step back from your party affiliation (whatever it is) and everything you’ve heard about the idea of instituting a balanced budget amendment. I want you to consider some things completely objectively. I’ll warn you when I get to the part where you can put your party colors back on! OK? Ready? Here goes….

If you’re reading this, YOU are almost certainly living under a “balanced budget” in your own home. If you weren’t, you couldn’t afford the internet connection you’re using to read this; much less the computer you’re using. If you’re reading this, there’s a 98% chance that you live in a state that has a balanced budget requirement built into the state constitution. Vermont is the only state that doesn’t have some sort of balanced budget mechanism in place. If you and the state that you live in need to live within your means, why shouldn’t the federal government be held to the same standard? It doesn’t take a trained economist to figure out that if you spend more than you make (or take in), you are heading for trouble . The same holds true whether you’re talking about an individual or a business or a government. ‘Sure,’ you say, ‘but I have a care loan and (maybe) a home mortgage – isn’t that spending more than I take in?’ No, because you are, ultimately, calculating that you can afford to make the payments each month within your balanced budget. Hopefully, within your budget you have even accounted for money you are putting away for a rainy day- a “surplus.”

These are the type of considerations any self-sustaining entity (person, business or government) lives by. It’s a simple concept. So, why not impose the same standard on the federal government that everyone agrees spends too much. Yes, there are disagreements on what the government spends money on; but everybody has something that they believe the government spend money on foolishly and unnecessarily. For example and generally speaking, Democrats/liberals don’t like excessive defense spending and Republicans/conservatives don’t like excessive spending on social programs.Right? Well, if politicians no longer had the ability to borrow or print money to fund anything they want and, instead, had to figure out what they can afford, I think we can all agree that they would be at least a little more responsible about how they spend our money, what projects they devise and what promises they make to us, the American people.

Are we still on common ground?Can we agree, so far, that this would be a slight improvement in our government?

‘OK,’ you say, ‘but doesn’t a balanced budget amendment favor certain people or groups?’ No. How would it? Even in its purest form (I’ll get to this later, so just bear with me) it doesn’t change any of the fundamentals of our democratic system. Revenue can still be raised through taxes to actually pay for things we need or want, it would just help limitborrowing and keep the federal government living within its means- like we do. Of course there will be ebbs and flows in the makeup of the government over time. Some years Democrats will have more influence and some years Republicans will be stronger; but this is the very necessary basis of our system. Our system is set up on “checks & balances” and the dueling parties are a perfect example of that principle. We, the people, decide who controls the government and we have an opportunity every 2 years to effect a course correction if we don’t like what they’re doing. Limiting spending to what we can afford, and without unchecked borrowing doesn’t change this dynamic in the long run, it only limits the government’s ability to run up uncontrollable debt.

When we want to try something something new or different we look within our own budget for unnecessary spending in order to find the money. Right? Why shouldn’t the government do the same thing? If they weren’t able to raise the “debt ceiling” and borrow money because of a balanced budget amendment, they would actually do something about the rampant waste in other areas to look for the funds to implement something new. If they can’t find the funds within the budget or government waste, then they would have to make the case to the American people why it’s such a good idea and ask our permission to raise taxes to fund the idea.

That sounds good, doesn’t it? Wouldn’t that be better than some congressman/woman coming up with a cockamamie idea in a back room to please a special interest group or lobbyist and then simply raising the debt ceiling to borrow the money to implement it? Members of both parties have done this time and time again and chances are there’s an example where it really made you mad!

Think about this: A fiscal restraint system, like a balanced budget amendment, can do things that please both parties and solve a lot of issues:

  • Waste – Everyone agrees the government wastes a ton of money. If borrowing was severely limited it would forcethe government to pay more attention to its own wasteful spending and be more efficient in its use of OUR money!
  • War – Politicians would be a LOT more hesitant to engage in conflict if they didn’t have a “blank check” to borrow whatever they wanted! Before starting a conflict, politicians would have to look just as much at whether we can afford it as whether it’s the right course of action. Since starting a conflict would almost certainly require an increase in taxes, in the case of a balanced budget amendment, a President would have have to really make the case to the people and get them on board. A pretty big deterrent to initiating!
  • Military Spending – Since military spending is a big part of the budget, congress would have to take a hard look at the massive waste and redundancy in military budgets and be much more selective in the selection and creation of new technologies- choosing only those that make sense, are truly needed and can be brought to fruition on time and within budget.
  • Social programs – While social programs would likely take an initial hit, they will anyway because they aren’t sustainable under the current setup – something that very few people, on either side of the political aisle, disagree with. If the waste and fraud were seriously addressed, like a balanced budget amendment wouldrequire, a significant dent could be made in the current insolvency of these programs. Then, add to that the savings in other areas of government that could be redirected to social programs, and you’ve made significant progress towards funding social programs. A balanced budget amendment wouldn’t threaten social programs, it would mandate that they are run in a way that guarantees continued help for needy Americans. Addressing these issues, once and for all, would likely provide more benefits to those who need them!*
  • Taxes – For those who favor tax reform, a balanced budget amendment would make this more likely! Whether you favor raising taxes on the “rich” or reforming/simplifying the tax code or closing loopholes or any combination of these, a balanced budget amendment works for you! Once the government is forced to ‘live within it’s means’ and can’t simply borrow more money, the only source of revenue available will be taxes. Right now, Washington doesn’t have any reason to seriously deal with taxes because, rather than deal with such a tough and contentious issue, they simply choose to borrow more which only delays the discussion.
  • Debt/Deficit – Everyone agrees that the current, increasing debt is hog-tying the US economy. This is an issue that effects all Americans and one which both parties agree must be solved. A balanced budget amendment would force the government to eliminate the deficit in future years, would halt the debt from growing further and would put us on a track to begin paying of the debt. While we may have disagreements on how money (in the federal government) should be allocated and on whether taxes should be raised (and, if so, on who), one thing we can all agree on is that we would be better of if we didn’t borrow more money. Regardless of which side of the isle we are on, we can all agree that there’s enough money in this country that WE SHOULD be able to operate the government without having to borrow trillions of dollars a year. A balanced budget amendment would simply guarantee that we have the debate and do the tough work to make that a reality.
  • Special interest groups – By eliminating the government’s ability to borrow money indiscriminately, the hold that special interest groups have on politicians and their influence on policy will be greatly reduced. Politicians (on both sides of the aisle) have used their ability to borrow as much money as they wanted, as a way to fund projects and programs that are brought to them by special interest groups- groups that, in return, deliver votes in the following election. In any town other than Washington DC, this would be called bribery, extortion or fraud;but in the US Capital this is called “business as usual.” So, if we cut off the rampant borrowing that facilitates the influence of special interest groups, we can really limit their influence over our politicians. This doesn’t mean they’ll go away, it just means they won’t be as powerful as they have been.

Still keeping an open mind? C’mon, you can do it! I’m almost done. Hang in there!

Yeah, but what about emergencies? What if we have a natural disaster or are forced to go to war?  These are reasonable questions and there’s a really good solution. Included within a balanced budget amendment, there should be a provision to allow the government to borrow money and to run a deficit in the case of emergencies but that also limits that amount and imposes a strict time frame for full repayment. If we limited the borrowing to a certain percentage of our gross domestic product (GDP), defined what constitutes an “emergency” and imposed a set time frame (also tied to GDP) we could account for those emergencies. In other words, just like in our own personal lives, we would be able to borrow money when we really need it but we would be limited in how much we can borrow based on our ability to repay the loan in full; and we would given a firm time frame to repay the loan. If every person and every business is required to operate this way, why shouldn’t the US government?

OK, you made a pretty good case; but if it’s such a great idea, why are so many politicians opposed to a balanced budget amendment? They’re opposed to it because, basically, it’s like asking a politician to cut his own throat. Think about it – what politician want’s to cut off the money flow that helps him run for office? Remember how many political ads you saw during the last big election? Those ads, especially on TV can cost tens (if not hundreds) of thousands of dollars! Most politicians depend on the help of special interest groups to finance their election campaigns. So, why would they voluntarily cut themselves off from this money tree? They won’t. Not without enormous pressure from average voters, like you and me. Polls already show that roughly 70% of the American public already support the idea of some sort of balanced budget amendment.

Now you can put your party hat back on. I’m done.

I’m not expecting this one article to convince you; but I am hoping that it will make you think. Even though the biggest objection to a balanced budget amendment to the US Constitution comes from Democrats in Washington, they aren’t alone. There are plenty of Republicans who ‘brush off’ the idea of a balanced budget amendment. I challenge you to take a close look at those who object and I’ll be willing to bet that they take enormous sums of money from at least one special interest group. If they do, don’t you think it’s at least reasonable to consider that their motivations are less than pure? Isn’t it reasonable to consider that they’re putting their own self-interest and political career first, before the interests of the country and their constituents? All I’m saying is that the idea of a constitutional control that limits the government’s spending is not the “radical” or “crazy” or “impossible” idea that many politicians in Washington make it out to be! Remember that you most likely live in a state that has a balanced budget requirement of some sort; and remember that if we ask for one we’re essentially asking the politicians to give up access to a money tree.

Would it really be bad to at least have a serious national discussion about forcing the federal government to operate the way each one of us do, the way every business does, the way every union does, the way that every non-profit organization does and the way that 49 out of 50 states do- within some semblance of their means? How can we expect to continue spending more money than we have? There’s NO way for it to continue indefinitely. Every year our debt grows to swallow a greater and greater amount of our GDP and eventually, if this continues, it will equal (or even exceed) what we take in; and, eventually, we will end up living in a bankrupt country. There’s NO reason we can’t live within our means and still do what we need to do for those who need our help. If you’ve been opposed to a balanced budget amendment please take a fresh and open minded look. It’s an idea worth looking at and discussing, to see if we can’t come up with a way to implement a balanced budget constraint on the federal government and curtail the out-of-control spending that they’ve become so accustomed to. If we don’t, the consequences will be more severe than we can imagine.

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Is it really the oil companys’ fault?

Posted in Uncategorized with tags , , , , , on March 8, 2011 by The Center Shot

Is the price you paid this morning to fill up your tank really the oil company just making, “obscene profits” off you and “benefiting from the unrest in the middle east?” Is the pump price really the oil companys’ attempt to “gouge” the American public? The answer is “no,” despite what many people are thinking and saying. More about that in a minute. But what if they are? So what? The oil companies are PRIVATE companies; really no different than a couple buddies that have a house painting business or a ‘mom and pop’ gas station- they’re just bigger! The goal of ANY business is to make money- as much money as it can! Nobody begrudges a couple of carpenters who make record profits from building homes following a tornado or a realtor who makes a bundle during a boom in the housing market. So, why is there so much animosity towards the oil companies? How are they any different aside from the size difference?

Let’s be honest. This so-called animosity is nothing more than ‘jealousy.’ Nobody that’s lucky enough to own mineral rights over an oilfield or own stock in an oil company, whether they are a Democrat or a Republican, is complaining! They’re smiling all the way to the bank, as they should be; and as ANYONE who is that lucky would be. If you’re one of the oil company ‘haters,’ and tomorrow you inherited 10 oil wells your long-lost uncle left to you, you’d switch sides in a second- smiling as you cashed your monthly check and cheering on the rising price of crude!

Some people believe that the oil companies make, “enough” and should lower prices; but would they ever ask, or expect, another business (like the painters, carpenters, realtors, etc.) to voluntarily cut their profits? NO.

The ONLY reason that we hear about people’s anger at the oil companies is because we need oil for EVERYTHING and we all feel a price increase. Businesses take advantages wherever they can to increase their profits and it is ALWAYS at the consumer’s expense- that’s the nature of commerce. Usually, though, price hikes on a particular product only effect a small percentage of the population- not enough to make it “news worthy.” If current events were spiking the profits on “Pop-Tarts” it would annoy the heck out of me and a few million other people that love them like I do, but it wouldn’t even get a mention on the local news.

It’s just not right to begrudge the oil company whatever profits they are able to make from what do. Any more than I should begrudge you for making as much as you can at what you do! If you don’t like the price of gas that much, don’t buy as much. If demand gets cut then the price will drop and oil companies’ profits will drop. Make your point that way. But don’t keep buying gas at the pump and then acting like the oil companies owe you a lower price- they don’t. And don’t let your government try to regulate what a company does, within the law, to make the most profit it can or the next company they come after may be yours or the one you work for!

Now, about who’s fault the price of gas is. Lets start by looking at what goes into a price of gas- some things you may not know about.
Did you know that $0.18 of every gallon you buy goes straight to the federal government, that does absolutely nothing to justify their getting the money. Also, the states take as much as $0.68 of each gallon you buy. So, for those who are mathematically challenged, that’s as much as $0.86 of the gallon price goes to your state and the federal government that doesn’t have a darn thing to do with getting the oil out of the ground, processing it into fuel or delivering it to your local gas station! That’s roughly 22% of the price of the average gallon of gas today; and it’s almost 35% of the price of a gallon of gas before it started it’s recent rise! Now who’s making obscene profits?

That leaves the “oil company” between 88% (today) and 65% of what you paid for that gallon of gas to make a profit from. Not bad, you say? WHOAH, boy!! Lets not forget the cost of exploring for oil, drilling for oil (rig and machinery costs as well as wages paid to workers), moving (building pipelines and/or shipping) that oil from the well to the refinery; not to mention the cost of building and operating the refinery! Then there’s the cost of getting the fuel to local distributors. ALL this has to be paid for by the oil company out of that 88%-65% of what YOU pay at the pump. Don’t forget taxes that the oil companies have to pay out of the profits that they do make!

I won’t argue that the oil companies are making a ton of money; but my point is that their profit margin is a lot more slim than most people realize! There are not many people that would jump into a business with do much overhead and such a slim profit margin. And keep in mind that while these are major corporations and conglomerates now, but they all started from a relatively small number of daring men in the early 1900’s who had the foresight to see that we would switch from coal to oil as an energy resource! Like it or not, big oil is the “American Dream” in action and what everyone who starts a business dreams about.

When most people hear about the price of oil (and the resulting fuel) going up, they assume that it is the oil companies setting the price. This is incorrect; at least partially. The price of oil is HUGELY effected by unbelievably complex financial markets and their “speculators.”. According to F. William Engdahl of the Centre for Research on Globalization (www.globalresearch.ca), “As much as 60% of today’s crude oil price is pure speculation driven by large trader banks and hedge funds.” Speculation is nothing more than a fancy name for legalized gambling where people ‘bet’ on the future price. In 2006 a Senate investigation claimed that $25 of the $60 barrel price (at that time) was the result of speculation. If you extrapolate that out to today’s oil price ($105/barrel), then $43.75 of today’s barrel price is based on speculators and SHOULD be selling at $61.25!

With all these ‘fingers in the till,’ when it comes to the price of oil and fuel, is it reasonable to direct your anger towards the oil companies? No reasonable person should think so! There’s plenty of reason to be angry (I sure am!) but let’s direct it towards the right parties- government and “speculation!” Gambling is illegal in most places, including in New York City and Chicago, where a lot of this “speculation” goes on but this particular form of gambling is not only tolerated but encouraged by banks, investors and to some degree the federal government! People argue about all of the negative social ramifications of traditional gambling but these finical gamblers are ruining our economy and pushing us towards financial collapse while hiding in the shadows of America’s misplaced anger at the oil companies! It’s time to wake up and redirect our anger at the appropriate folks before they destroy our economy and our way of life. This country was founded on hard work and making things better and faster than anyone else and it’s about to be brought to it’s knees by ‘money changers’ that don’t produce anything but spend their days playing a shell game that’s the equivalent of economic russian roulette!