WASHINGTON. At the recent National Taxpayers Union Conference there was one single worry: that the movement to pass a balanced budget amendment to the Constitution would flounder and die. The public would lose interest, the vote would be close, and Congress would find some way to declare victory over government spending and retreat from the issue.
The federal deficit, after all, has been declining for four straight years. Republicans now control the Congress. More impressive, the deficit is a pittance, a mere $107 billion. These days that’s pocket change.
Obviously, federal spending and balancing the budget are a non-problem, right?
Wrong. Republicans are not going to balance the budget. They are part of the problem. Recall, if you will, Republican Presidential candidate Bob Dole bragging that he “helped save Social Security” in the early eighties. What he really did was vote to increase the employment tax, draining the paychecks of young working Americans and creating a surplus that could be spent elsewhere, leaving the Social Security trust fund filled with IOUs from the Treasury. The same Social Security surplus, $67 billion in 1996, now allows both Republicans and Democrats to lie about how much the deficit has been reduced.
When it retires, the current working generation can eat Treasury paper instead of cake.
The real reason we need a Balanced Budget Amendment can be found in the bi-partisan mendacity and smoke blowing about the Consumer Price Index, our official measure of inflation. It overstates the actual rate of inflation, the economists say. Democrats and Republicans nod there heads. We change our shopping habits, the economists argue. Products improve, they assert. The net result is that the CPI has been overstating the rate of inflation for decades, perhaps as much as one percent a year.
In fact, our bi-partisan economists left something out of their arguments: taxes. They were ignored. Only an economist or a politician could make such an omission. No one who lives in the real world would think that any measure of inflation would be complete without considering taxes.
Except our collected friends in Washington.
In fact, taxes are a significant part of our cost of living. I bet you’ve noticed. Indeed, taxes are “inflating” far faster than most of the goods and services we buy in the private sector.
The best way to see this is to compare the growth in government spending with the growth in family income and taxes over a generation. According to calculations made from Tax Foundation data, government spending has risen at a compound rate of 7.9 percent from 1955 through 1996. During the same period, the combined total cost of federal income and employment taxes for a two earner family rose at 6.6 percent while inflation, as measured by the Consumer Price Index, rose at 4.4 percent. ( the figures are show in the table below).
The Real Generation Gap
| Item | 1955 | 1996 | Annual Growth Rate |
| Federal Spending | $69 bil. | $1,538 bil. | 7.9% |
| Federal Debt | $274 bil. | $5,182 bil. | 7.4% |
| Federal Revenue | $73 bil. | $1,379 bil. | 7.4% |
| Federal Taxes, Median 2 Earner Couple | $1,743 | $8,038 | 6.6% |
| Income, Median 2 Earner Couple | $5,250 | $53,091 | 5.8% |
| Consumer Price Index | NA | NA | 4.4% |
Sources: Tax Foundation, Ibbotson Associates, Economic Indicators
Note that we are not talking about rich people here. We are not talking about incentives, cruel punishments for capital, or any of those bizarre ideas. We are talking about the median income of two earner families. We are talking about Joe Six Pack, not Joseph Coors.
It is middle class, middle income America that is threatened by the constant inflation of taxes. Not the rich. Not the well off. It is the middle income families’ retirement that is threatened by a government that wants to fund everything with IOUs.
Direct Federal Taxes on the Median Two Earner Family
| Item | 1955 | 1996 | Annual Growth Rate |
| Income | $5,250 | $53,091 | 5.8% |
| Fed Income Tax | $ 513 | $ 5,139 | 5.8% |
| FICA | $ 84 | $ 3,899 | 9.8% |
| Total Taxes | $ 597 | $ 8,038 | 6.6% |
| Taxes as % Income | 11.4% | 15.1% | NA |
Source: Tax Foundation
You think I’m kidding? Then consider this, even as the median families’ tax burden was a major source of inflation and the taxes they paid rose much faster than measured inflation, federal spending exceeded federal revenues. Not by $107 billion. vsw But by $5 trillion — that’s how much gross federal debt increased during the working life of one generation.
We need a Constitutional amendment for a balanced budget. We need it now, while we still have a Constitution to amend. It’s that simple.
This information is distributed for education purposes, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, product, or service.
Photo by Aleksey Kuprikov, Pexels
(c)A.M. Universal, 1997