Welfare Economics 101: Lesson 1 Over the next two weeks we are going to start hearing about the “budget battle” between Congress and the President. And then on September 30th, Congress will pass a continuing resolution to keep the federal government going. (By the way, this is unconstitutional, therefore illegal.) Before we can get into the crux of the conversation we need to discuss Constitutional facts. Article I, Section 7 reads, “All Bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other Bills.” Hamilton was forward thinking enough to recognize in Federalist Paper #31 that the Federal Government could effectively tax so heavily the State Government could be forced (by the Fed) to cancel their taxes for people to meet their federal obligations. He also states in Federalist Paper #33 that along with the power to tax is the implied power to make laws to spend the collected funds. Now, when the House passes a budget and the Senate approves, it is sent to the President. The President has three options according to Article I, Section 7. First, he has ten days (excluding Sunday) to sign the bill into law. Second, he can do nothing and in ten days (excluding Sunday) the bill becomes de facto law. Third, he can veto the bill and send it back to Congress with objections. Once this occurs, the House can make changes and resubmit, or the House can still pass the law with two-thirds vote. Then if the Senate also votes two-thirds the bill is still passed and the President’s veto is over-ridden. This is how “checks and balances” works within the Constitutional blueprint. The reason a battle over this fiscal’s year budget is going to occur is because of the Affordable Care Act (ACA), better known as Obamacare. The House is threatening to defund Obamacare and the President is vested because this is his signature law. Now, refer back to the Constitution. Which body is responsible for the budget? The House is responsible, not the President. BO can complain, but if Congress would unite as a political body, instead of party lines, they could effectively defund Obamacare. Now, consider your personal budget. Let’s assume you budget $250 a month for food. At the end of the month you have only spent $240 on food, so you have $10 leftover. With that money you can save it by actually placing it in savings or you can reallocate it by spending it elsewhere. Note, it is only savings if you actually place it is a saving account. If you spend more than $250 in groceries you are over-budget and the money has to come from a different fund, or you operate with a negative balance. If we are responsible with our budget, we keep it balanced and if we have debt, we try to pay it down. The Federal government talks about a balanced budget, but a balanced budget is still unsustainable. Why? Because interest payments are going to increase as interest rates increase and as principle increases with more borrowed money. Instead of a balanced budget the federal government needs a budget with an actual savings. The savings needs to then be spent paying down the principle of our $17 trillion debt. How can this happen? Simple, the House needs to look at the income of the U.S. Let’s go with $3.0 trillion. They should then say, “We are only going to spend $2.0 trillion this year, and the remaining $1.0 trillion is going to go directly to the deficit.” Until this mentality is adopted by Congress and all Legislators are willing to vote to override a Presidential veto, the deficit will continue to rise. Finally, the Federal Reserve is printing money to “stimulate” the economy. This is not good. Why? First, when the printing stops, the stimulating stops and the economy stops. Second, the more dollars circulating the less its value. The less its value, the higher inflation. This same principle applies with everything of value. To prove the point, I googled “most valuable signatures.” Find the list here: cvtreasures/top-ten-most-valuable-autographs-page-48 . Number 10 on this list is Paul McCartney valued at $2,400 and up. Number 9 is Tiger Woods valued at $2,625. They are the only two on the list that are alive. Number 1 on the list is Shakespeare. Why? Because six signatures are known to exist in the entire world; coupled with supply and demand, and so few available his signature is very expensive. Too many dollars have been printed and because they aren’t backed by gold, their value continues to fall, driving up the price of oil, food, clothes, and anything else bought with a dollar. -ds
Posted on: Mon, 16 Sep 2013 13:56:14 +0000
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