I'm going out in just a minute, and so I'm going to reprint a treatise that I just wrote over on Fubar in the Politics forum, regarding my feelings on American fiscal policy. It starts by addressing the notion of amending the Constitution to prevent deficit spending, except for in the time of war. Surprisingly, I didn't swear once while I was writing it:
Taxation and the Debt
I don't believe an amendment to the Constitution is necessary, let alone probable. Prior to the Hoover administration, deficit spending was virtually unheard of until Keynesianism (as in British economist John Maynard Keynes) took hold in the United States; a theory which states that government borrowing, taxation, expenditures and overall monetary policy could be used to stimulate economic demand. It is this sort of government economic policy that sped recovery from the Great Depression and kept the world economy from sliding after World War II.
It is, however, my belief that Keynesian economics do not work in this day and age, and that there are advantages to paying down the national debt through government tax-surpluses, as we had from 2000 to 2002, courtesy of the Clinton administration. Observant holds that the government should spend exactly what it takes in, but when you throw in the fact that forty-seven percent of federal income-taxes in the United States is used to merely pay the interest on the ballooning U.S. national debt, we have to realize that there is clearly a problem that can only be mitigated through better economic policy.
Unfortunately, no one likes to hear, "Your taxes are going up," regardless of the fact that it may benefit the country in the long run. Cutting taxes to stimulate the economy is not a theory that was born from the Bush administration, as the Kennedy administration attempted to do the same thing (which was passed under LBJ), though it seems almost a dangerous thing to do in this day and age, with the debt going from six-trillion dollars to seven-trillion in the two years from 2002 to 2004, with a projected 1.4 trillion more dollars worth of debt over the next ten years.
Without a national debt, the country can spend its tax-dollars on government programs, thereby making government more fiscally efficient. Without a national debt, the government would not need to borrow money from the Social Security fund every year to offset monetary shortages, which would ultimately mean that our generation would get Social Security. By eliminating the national debt, the United States would not be subject to foreign banks calling in their loans when their home-countries' economies take a dive, thus keeping the United States from falling into a worldwide-recession with them as the government tries to find funding to pay those loans.
The alternative to eliminating the debt is to grow the United States' gross domestic product (GDP), which would bring with it more taxation at the current rate, and therefore would lower the debt, relative to what the government is taking in. Politicians love this method (since it doesn't involve raising taxes), and this is what the current Bush administration was hoping for with the round of tax-cuts in 2002, and we can see that it's failed by the fact that the Dow Jones, NASDAQ and various other stock-market indices have not risen appreciably since those cuts were made.
That's about it for this general treatise on the national debt. Granted, it is only peripherally related to the subject of taxation, but I feel that fiscal policy and taxation essentially go hand-in-hand, not to mention the statistic I called upon regarding our tax dollars being spent to pay the debt's interest. It's still the economy, stupid!