Today my friend Jeff Boreman sent me a link from the CBS investigative news program 60 Minutes. This segment reported on the financial bind that municipal and state governments are increasingly encountering. Many private companies who have provided goods or services to these government entities are not getting paid in a timely manner. This tends to have a negative domino effect in the economy as hardship is passed along or as borrowing increases to provide float to the governments. The stimulus package advocated by President Obama and passed by Congress is reported not to have helped solve this problem but only delayed the day of reckoning which is predicted to come this year. Click here to view the report.
Jeff views the problem as a fundamental flaw in the current configuration of government. The oversight of Congress is limited to the periodic election of senators and representatives by citizens in the various states. This (along with the action of the other two branches of government) is seen as not a sufficient or effective check on Congress. Jeff writes:
Perhaps a third elected body who's only job is to hold congress accountable. The only bills they could pass would be congress regulations. Congress would no longer create their own rules. They could no longer pass a pay raise for themselves. This third body would have the power to impeach members of congress or enforce other means of punishment. This would have to be party neutral as well.
There may be several difficulties with this approach. How party neutrality could be assured is difficult to envision. While voting pay raises for themselves can be extremely irritating, the greater issue is the ability to run up public debt to unrealistic and unsustainable levels. The fundamental flaw of democracy may well be that human nature induces unrestrained consumption or investment when not checked by what is realistically feasible. The public indirectly through its elected representatives give themselves all sorts of unlimited benefits and pay raises. God’s corrective tool for such misbehavior is bankruptcy or hyperinflation.
Somehow I hear a Constitutional phrase: “Congress shall make no law…..” If we only knew how to complete that sentence to effectively curtail the human tendency for limitless self-indulgence, we would be much better off. Now I see our situation as analogous to a starship in the vacuum of space that has developed a hole in its skin. Unless we can somehow patch that hole the whole democratic experiment is in jeopardy. My current thinking centers on a Constitutional Amendment that would limit the deficit to a percentage of the GDP. This in a way flies in the face of Keynesian economics. That view holds that in the depths of a business cycle extensive government investment will be rewarded eventually by a return to prosperity and economic health. This outcome justifies and pays for the earlier investment by the government. Such investment in dark times brings with it unavoidably an element of risk and its constant companion hope. But what if the hope is unjustified? What if, despite the heavy investment, the economy does not improve for various reasons—such as if actions primarily stimulate the economies of trading partners who have economic advantages. If the hoped for results do not materialize, then the results are devastating as the deficit grows exponentially.
In a sense, I see this as a religious problem. Part of the concept of God is that man is not in control, God is. There are objective rules that govern society even if they are not identified or acknowledged. In the long run, these eternal verities will always prevail. I think one of these rules is becoming clearer—no society can increase debt or print money fast enough to satisfy the human appetite for more. More can come, but it must be earned. It is time to pray for Divine guidance in further crafting the mechanism of democracy. It is becoming clearer every day that deficiencies exist. The US Constitution has done well to put checks and balances within government. It is time to somehow include a measure of financial realism to this hallowed experiment. The government is in a sense outside and above the market. This should never be forgotten.
