According to the BBC today: “The chancellor will attempt to bind future governments to maintaining a budget surplus when the economy is growing, he will announce later. In his annual Mansion House speech on Wednesday George Osborne will outline his plan to limit governments to a balanced budget in “normal” times.”
That we have to resort to creating laws in order to forcibly prevent the State from overspending and borrowing to such a degree that it bankrupts itself (and the nation) is proof that it is utopian to believe that people in government will restrain themselves from abusing the power they have to spend other people’s money and to fund their schemes by borrowing endlessly against the future earnings of the unborn. Even the current Conservative government continues to do this, and to increase the national debt.
Trying to use the law to force the State to obey the laws of economics, however, is like trying to force a mad man who believes he can fly to obey the laws of physics. It’s not going to work. Sooner or later Mr bird man is going to jump off a tall building, and eventually government will overspend and borrow. This is because, to paraphrase economist and author Thomas Sowell, the first rule of politics is to disregard the first rule of economics, which is that there is never enough of anything to fully satisfy all those who want it.
It’s unrealistic to believe that future government leaders will accept being bound by budget rules made by previous politicians of a different era – even if they are laws. If a future government believes those laws to be unjust or inconvenient, then it will simply repeal those laws or, if there’s public outcry, then it will convince the public that these are not ‘normal times’ and an ‘exception’ must be made for the greater good.
Rain is wet. Grass is green. An institute with the power to spend a portion of everyone else’s income and with the power to borrow against the future earnings of the unborn will never restrain itself such that it remains within its budget and maintains a surplus. Why? Because its incumbents have little to no incentive to do so. And that’s because they don’t pay the cost of not doing so.
Whenever individuals or a group of individuals in society are disconnected or shielded from the costs of their mistakes or the consequences of their actions, harm invariably happens.