Tuesday, May 3, 2011

Senior CFR Fellow Calls for Doubling Spending Cuts when Congress Faced with 'Emergency' Spending

There's sound advice coming from a Senior Fellow at the Council on Foreign Relations, Amity Shlaes. She is calling for a constraint mechanism in any budget plan, whereby, if Congress determines it needs to increase spending for any items, above those in a given budget, that those emergency spending programs be accompanied by spending cuts of twice the size. The idea is to prevent Congress from simply raising taxes for any emergency and instead force the shrinking of  government. Shlaes writes:

...the consoling phrase I keep hearing as lawmakers talk about implementing an automatic control on government spending in the style of the 1985 Gramm-Rudman plan. President Barack Obama, for example, has called for a “debt failsafe” that would cut spending and raise taxes if the ratio of the federal debt to gross domestic product doesn’t stabilize by 2014...

Of course the calm counsel on the need for devices is supposed to distract us from the fact that the devices are being put forward as part of a wild package that would increase the debt ceiling well above the appalling and unsober level of $14 trillion...

A new constraint mechanism that includes tax increases may indeed check government growth, or even shrink it. Such a trigger plan, however, may also allow the House and Senate to prance around claiming they are demonstrating discipline even as they expand government. It is, after all, possible to maintain a large balanced budget. My preference would be for a mechanism whose sole aim is to make government smaller, where any spending increases triggered spending cuts of double the size.
There isn't more solid, creative thinking on finance and economics from within the establishment than what is being put out by Shlaes. This proposal is just one example. Given the proposal's soundness and implied rejection of Keynesian spending prescriptions, I hope Shlaes is ready for a vicious attack from Paul Krugman. Krugman, the apologist for big spending government, is unlikely to let this proposal develop from within establishment walls. More than likely, he will launch an  attack that isn't less fierce than the take no prisoners attack on Osama bin Laden.

She's really one courageous lady. Her views aren't usually the type that are discussed within the CFR halls that Rockefeller built. Yet, she has consistently proven to be a truth seeker. Speaking truth to serious power.  Her book, The Forgotten Man: A New History of The Great Depression,  advanced the very Austrian view that both Presidents Herbert Hoover and Franklin Delano Roosevelt promoted economic policies that were counterproductive and prolonged The Great Depression.

Again, a view that is not normally considered in establishment circles. From what I hear, though, she is having impact with some senior CFR officials

Let's hope there are some lawmakers, who have the courage that she has, and that they introduce and support legislation with the type budget constraint mechanism she is calling for.


  1. All these "proposals" are just gimmickry. The only real long-term solution is to end the Fed and monopolized-fiat money with it.

    Our "lawmakers" don't pay attention to the U.S. Constitution, much less their own feeble rules to control themselves. You have to attack them at the source of their power -- the Fed.

  2. Smoke and mirrors. She is just there to give the illusion of competing ideas.

  3. Whoa! I had no clue about her connection to the CFR.

    Anyways, I read her book The Forgotten Man last year. It is quite good. She opens the book with a most wonderful quote from William Graham Sumner "As soon as A observes something which seems to him to be wrong, from which X is suffering, A talks it over with B, and A and B then propose to get a law passed to remedy the evil and help X. Their law always proposes to determine what C shall do for X, or in the better case, what A, B, and C shall do for X....What I want to do is to look up C. I want to show you what manner of man he is. I call him the Forgotten Man. Perhaps the appellation is not strictly correct. He is the man who never is thought of.... He works, he votes, generally he prays--but always he pays...."

    I highly recommend the book.

  4. Shales is writing a sympathetic biography of Calvin Coolidge. Though I am no fan of any president, Coolidge was certainly less destructive and closer to classical liberalism than many other presidents.