This series of papers proposes solutions to American governmental problems that could be addressed by a Constitutional Convention. Please refer to American Rebirth Paper No. 0 to understand additional context of this paper and subsequent papers. American Rebirth Papers No. 1 through No. 4 addressed problems with and proposed solutions to Federal, State, and County elections for President, Governors, County Executives, Federal and State Congressman and Senators, and other positions in the Federal, State, and County Governments. American Rebirth Paper No. 5 addressed problems with and proposed solutions to the Judicial branch.
American Rebirth Paper No. 6 will address problems with the Federal budget and propose solutions to alleviate those problems.
The US Constitution established a Federal Government that is responsible for issues that affect all the States and left other issues that are local to individual States to be dealt with by the States. Article I, Section 8 of the Constitution (shown with original spelling and text) describes the duties of the US Congress:
The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;
To borrow Money on the credit of the United States;
To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes;
To establish an uniform Rule of Naturalization, and uniform Laws on the subject of Bankruptcies throughout the United States;
To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;
To provide for the Punishment of counterfeiting the Securities and current Coin of the United States;
To establish Post Offices and post Roads;
To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries;
To constitute Tribunals inferior to the supreme Court;
To define and punish Piracies and Felonies committed on the high Seas, and Offences against the Law of Nations;
To declare War, grant Letters of Marque and Reprisal, and make Rules concerning Captures on Land and Water;
To raise and support Armies, but no Appropriation of Money to that Use shall be for a longer Term than two Years;
To provide and maintain a Navy;
To make Rules for the Government and Regulation of the land and naval Forces;
To provide for calling forth the Militia to execute the Laws of the Union, suppress Insurrections and repel Invasions;
To provide for organizing, arming, and disciplining, the Militia, and for governing such Part of them as may be employed in the Service of the United States, reserving to the States respectively, the Appointment of the Officers, and the Authority of training the Militia according to the discipline prescribed by Congress;
To exercise exclusive Legislation in all Cases whatsoever, over such District (not exceeding ten Miles square) as may, by Cession of particular States, and the Acceptance of Congress, become the Seat of Government of the United States, and to exercise like Authority over all Places purchased by the Consent of the Legislature of the State in which the Same shall be, for the Erection of Forts, Magazines, Arsenals, dock-Yards, and other needful Buildings;–And
To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof.
Also, Article IV, Section 4 of the Constitution describes general duties:
The United States shall guarantee to every State in this Union a Republican Form of Government, and shall protect each of them against Invasion; and on Application of the Legislature, or of the Executive (when the Legislature cannot be convened) against domestic Violence.
And the 10th Amendment describes the authority delegated to the individual States:
The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.
I will refer to the above portions of the US Constitution in this Paper and in subsequent Papers that will address other issues with the Federal Government. This Paper addresses the following problems:
1. Except for the four-year period from 1998 to 2001, the Federal Government has spent more than they have taken in from taxes and other income in the 50-year period between 1971 and 2021. As a result, the total US Government debt as of October 2021, is nearly $29 trillion. This amount is 126% of the 2020 Gross Domestic Product (GDP) of about $23 trillion. The debt per US citizen is $87,000.
2. Congress is more inclined to over-spend than under-spend because over-spending helps in their reelection campaigns. Spending to support special interest groups often results in the special interest group members deciding to vote for the Congressman and Senators that supported the spending. In contrast, a Congressman or Senator that does not support spending can be labeled as an uncaring individual. For example, not supporting school lunch programs can be negatively used by an opponent by labeling the politician as someone that “wants children to starve.” American Rebirth Papers No. 1 through 4 address this issue in part by changing the way our Congressman and Senators are selected.
3. Federal Government programs are enacted and rarely eliminated. Some of these programs, such as Social Security and Medicare, have grown enormously to the point they consume more Federal spending than institutions (such as Defense) that are Constitutionally required. The best way to deal with this problem is to never enact the program in the first place.
Table 1 shows Gross Domestic Product (GDP, a measure of the total output produced by an economy, in this case the US economy) and Federal spending for selected years from 1929 and 2020. As shown in the table, Federal spending as a percentage of GDP has grown 10-fold from 1929 to 2020. Spending during World War II is not shown because spending necessarily ballooned to fight the war. During the period shown, some notable legislation/events that occurred are as follows:
Income taxes were legalized by ratification of the 16th Amendment in February 1913.
The Social Security Act was signed into law by President Franklin D. Roosevelt in 1935, creating a federal safety net for elderly, unemployed and disadvantaged Americans. The main stipulation of the original Social Security Act was to pay financial benefits to retirees over age 65 based on lifetime payroll tax contributions.
The Medicare/Medicaid program was created in 1965. Medicare provides medical insurance to retirees over age 65, and Medicaid provides health care benefits to low-income individuals.
Year 2020 Federal spending ballooned due to stimulus spending passed in response to the Covid-19 pandemic.
All dollar amounts shown in Table 1 have been adjusted for inflation such that dollar amounts are expressed in equivalent dollars in year 2012. Prior to the creation of Social Security, Federal Spending as a percentage of GDP was much lower, only 3 percent of GDP in 1929. Federal spending per US citizen was only $271, and the GDP per person was over $9,000. The last column in the table shows the percentage of Federal spending per person as a percentage of the GDP per person (e.g. $271 is 3 percent of $9,024).
New Deal Federal programs enacted by President Roosevelt increased spending such that by 1941 Federal Spending was 10.6 percent of GDP.
After WW II, the lowest Federal spending as a percentage of GDP occurred in 1956, and the highest occurred in 1982. Generally, Federal spending as a percentage of GDP was relatively constant until 2020, when spending increased dramatically due to the Covid-19 pandemic. Therefore, during the period between the end of WW II and 2019, Federal spending increased in lockstep with GDP.
Table 1 illustrates the remarkable growth in GDP that was driven by capitalism and the American culture where hard work and risk-taking are rewarded. Between 1956 and 2019, the GDP increased by a factor of 6.5. Over the same period, Federal spending increased by a factor of 8.6.
This growth in GDP and Federal spending raises some fundamental questions:
Since rising GDP is making everyone more affluent, shouldn’t Federal spending decrease (as a percentage of GDP) because individuals and families are less likely to be needy?
As the nation becomes wealthier, does that mean we want the Federal government to spend more “because we can afford to?”
Is the greater standard of living we enjoy today compared to a century ago due to rising GDP or greater government spending?
Before tackling these questions, further analysis of our current budget (2019, pre-COVID) will provide additional context. Table 2 provides a summary of Federal spending as a percentage of GDP for year 2019 for some categories of spending.
Border security includes: Customs and Border Protection, Immigration and Customs Enforcement, Citizenship and Immigration Services, and Coast Guard
If Social Security and health programs (Medicare, etc.) are subtracted from the Federal spending, we are left with spending that is 10 percent of GDP, equivalent to $15,530 per person which is about one-fourth of the amount of GDP per person in 2019 ($57,676). This level of spending (10% of GDP) is about the same as pre-WW II spending levels.
There is no language at all in the Constitution that says the Federal Government shall provide old-age insurance for retirement and health care; there’s no language that says the Federal Government shall provide support to the poor or disabled who cannot afford health care. There is language that says the Federal Government is responsible for protection of the country, including funding “Armies” and a “Navy” as well as to “repel invasions.”
One could argue that our current military is a too large because the United States is counted on (some would say taken advantage of) by other countries, including many wealthy European countries, to provide a global military force to counter the bad actors (e.g. the Chinese Communist Party) we are still dealing with. I believe this is a valid point, and to the extent we can, we should encourage (and strong-arm) other countries to help support the cost of military infrastructure to maintain forces that will be prepared to fight for democracy and oppose communism.
Border security is necessary and rightfully should be the responsibility of the Federal Government, especially in the current environment where our Southern border is currently being evaded by thousands of illegal immigrants, drug traffickers, and human traffickers. The current government’s approach under the lack of leadership and out-right refusal to uphold our laws can only be described as a complete failure to adhere to the oath taken by the President upon taking office:
“I do solemnly swear (or affirm) that I will faithfully execute the Office of President of the United States, and will to the best of my Ability, preserve, protect and defend the Constitution of the United States.”
But, the issue with our border security is a side note to the point of this Paper, which is to deal with the Federal budget. Getting back to the questions raised in the lead-in to Table 2, I will give my opinions here, but propose that these questions be used as means to start discussions during the Constitutional Convention about limiting Federal Government spending, either as a maximum as a percentage of the GDP or perhaps as a maximum percentage of spending per person in relation to the average GDP per person.
First, let’s address the two questions regarding rising GDP and increased government spending because we can afford to spend more:
Since rising GDP is making everyone more affluent, shouldn’t Federal spending decrease (as a percentage of GDP) because individuals and families are less likely to be needy?
As the nation becomes wealthier, does that mean we want the Federal government to spend more “because we can afford to?”
It is my opinion that Federal spending should increase with rising GDP, but that the percentage of spending versus the GDP should be limited to a maximum somewhere between 5 and 10 percent of GDP. This range of spending assumes that Social Security and Medicare (plus all other health programs) are eliminated. I will address each of these areas of spending in subsequent American Rebirth Papers. Prior to WW II, Federal government spending was within the 5 to 10 percent range; therefore, I’m not proposing anything extremely radical. Also, it’s important to note that because the GDP has risen substantially, the amount of spending at this range would still mean that the government would be able to spend at a rate that is much greater than the pre-WW II years.
There is no doubt that rising GDP, which has increased Federal revenue, has allowed the Federal government in the last century to make beneficial expenditures that have improved the quality of life in the United States. Some of the government-funded projects include sanitary wastewater treatment, water treatment facilities, water collection and storage facilities, power generation (primarily dams), irrigation, transportation (such as the interstate highway system), and cleaning up hazardous waste sites. These expenditures show that government spending, beyond the necessary spending needed for constitutionally required functions (military, border control, and functions needed to run the government), have been and can continue to be a good thing.
At some point, however, the amount of revenue reaches a point where more spending doesn’t necessarily make sense. Any government spending needs to pass a very simple, common-sense test - is the value created by the spending more than the cost? At face value, this rule seems extremely rational. Why would we want the government to take $10,000 from a taxpayer and then spend that money on something that is only worth $5,000? The difficulty with government spending, unfortunately, is that placing a value produced by the spending is often hard to determine. And, because it is difficult and because lawmakers would rather not know if the spending produces value (showing you care about your constituents is more important than doing something that is fiscally responsible), our lawmakers sweep any discussion of value produced under the rug.
Consider a hypothetical government program to create jobs. The government pays unemployed workers to break windows, keeping in mind that the window-breakers must break windows using the government-proscribed method where no one gets hurt. Not only does this job-creation program create jobs for people with window-breaking skills, but it also creates job for insurance companies and businesses that replace windows. What a great program - think of the jobs it could create! Of course, it is obvious that this government program produces nothing of value. Assuming all the broken windows are repaired, we have the same condition after the program is completed as we had before the program started. In fact, a program such as this would produce negative value. Insurance companies would quickly raise deductibles for broken windows, leaving the cost of repair mostly up to the building owners. Some owners would simply replace the windows with plywood. Why repair a window that could be broken again?
One might say that no government would spend money so wastefully. We know, however, that wasteful spending is a hallmark of government, particularly with our current system, where our politicians are prone to spend money we don’t have (i.e. deficit spending) on pet projects that please special interest groups. An example of this type of spending is government subsidies for projects that please climate change acolytes. Spending money on windmills and solar power results in greater cost for the power consumer (pretty much everyone in the US) while making a negligible dent in carbon dioxide emissions. I’d say that is a negative value for the power consumer, wouldn’t you?
If the goal was to reduce carbon dioxide emissions, the best, most economical thing we could do is spend money converting coal-fired power plants to natural gas. The reason the United States has had falling carbon dioxide emissions since 2000, when the total emissions peaked, is because we have utilized our abundant natural gas resources for power generation while shutting down coal plants. Per equal unit of power, natural gas emits half as much carbon dioxide as a coal. We could also spend money on nuclear power, which has no carbon dioxide emissions at all while providing continuous and extremely reliable energy. Contrary to what you may believe based on the news spinning performed by climate change acolytes, mainstream media, and virtue signaling corporations, the United States per capita emits carbon dioxide at a rate today that is less than the rate in 1960.
Because government spending is often wasteful, I propose that all bills must include an analysis of expected value produced by the spending. In addition to the government producing an analysis of value, non-government entities (except in the case of emergency spending) must be given an opportunity to perform their own analysis, and Congress must consider input from these entities prior to voting on the bill.
To summarize, this American Rebirth Paper proposes the following:
1. Eliminate Social Security and Medicare (along with other health programs).
2. Limit spending to 5 to 10 percent of GDP. There are several possible ways that a constitutional limit could be enacted; debate and discussion as to how this could be achieved would be a part of the Constitutional Convention.
3. Mandate that all spending bills include analysis of anticipated value produced by the bill. In addition, each government program must provide an estimated value produced in their annual budget reports.