America's Fiscal Constitution Read Online Free PDF Page A

funds—fighting two wars and filling budget holes during a severe downturn—account for no more than half the debt incurred during 2001–2013.
    Myth: “We cannot balance the budget without hurting the economy.” Long run economic growth results from a growing and productive workforce, not greater debt. The United States has experienced sustainableeconomic growth principally at times when the federal government repaid debt or borrowed very little in relation to the size of the economy. From 2000 through 2007, even before the Great Recession, private sector job growth lagged far behind twentieth-century averages despite a massive federal borrowing binge.
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    I N HINDSIGHT IT IS easy to describe what happened: After 2000, members of Congress and two presidents made commitments that resulted in a large gap between spending and tax revenues. In short, they behaved like many government officials in many nations throughout history who descended down the slippery slope of debt—to use Washington’s phrase—“like a snowball . . . rolling.”
    Debt-financed spending has a powerful allure. It disguises the perceived cost of government, what economists call a “fiscal illusion.” In fact, this very illusion is critical to the notion that debt-financed spending or tax cuts can stimulate the economy; people would be reluctant to spend or invest more if their share of higher federal debt showed up on their credit card balance.
    Traditional budget practices—clear accounting, “pay as you go” budget planning, trust fund spending confined to dedicated revenues, and specific congressional authorizations of the amount and use of each new debt—had been eroding for years before the link between taxes and spending broke in 2001.
    Rosy projections, creative accounting for trust funds, and traditional borrowing during wars and recessions made it difficult for voters, and sometimes even elected officials, to appreciate the extent of the nation’s dependence on debt. Benjamin Franklin had once noted the plight of debtors in denial: “The second vice is lying, the first is running in debt. . . . lying rides upon debt’s back.” 22
    American history after 2000 is not the most promising place to find a solution to the current debt crisis. It is more useful to seek guidance from lessons learned from prior generations of American leaders who matched federal commitments and resources—and still managed to get reelected.
    Too often budget battles often appear as minor subplots in historical narratives constructed around the drama of elections and wars. Some say that politicians campaign in poetry and govern in prose. Frequently,however, numbers rather than words yield greater insight concerning hard decisions. Political rhetoric can gloss over the difference between the ideal and the possible. Libraries contain hundreds of books describing Civil War military campaigns, yet few volumes shed light on budget battles extending over two centuries. Just as peacekeepers leave lighter footprints in history than do soldiers marching in war, so too has the legacy of budget heroes faded from popular memory. Nonetheless, their success in limiting debt preserved the nation’s future and independence.
    This book narrates a journey along a tested trail of fiscal safety. Earlier generations who persevered along that path overcame partisan, regional, and ethnic obstacles far greater than those today. They built a great nation without mortgaging its future. They opened doors of opportunity, created the first generation of older Americans with financial security, and set a standard of living that remains the envy of much of the world. They fended off an invasion from the world’s strongest military power, secured possession of much of North America, endured a civil war, financed two world wars, and relieved human suffering during three severe economic depressions.
    The story of Americans who crafted and respected America’s fiscal