Earlier this week, President Joseph R. Biden Jr. asked Congress to raise taxes and increase borrowing so his administration can spend $2.3 trillion — on top of the $1.9 trillion Congress authorized two months ago for so-called COVID relief — for thousands of projects he calls “infrastructure.” All this is in addition to the $2 trillion that the government borrows annually these days just to make ends meet.
These are serious numbers of dollars, the repayment of which will have seriously unpleasant consequences for future generations of Americans. Indeed, under Biden’s administration, the feds will borrow three times what they collect in taxes. This is not a new phenomenon, but it exacerbates the modern trend of spend now and pay later.
Under the Constitution, can the feds borrow as much as they want and can they spend it on anything they want? Here is the backstory.
When James Madison and his colleagues wrote the Constitution, they addressed the problem of debt. They knew governments borrow vast amounts of money to address emergencies, usually wars — as the 13 colonies had just done. When Madison and his colleagues were deciding upon the powers of the new federal government, they included the power to borrow money but excluded the power to create and operate a bank.
Madison understood that the Constitution limited the power of Congress to spend monies — whether obtained by taxes or debt — to the 17 discrete areas of governance delegated to the federal government in the Constitution.
Thus, when Treasury Secretary Alexander Hamilton proposed a national bank, Madison, then a congressman, argued fiercely against it. He offered that the Constitution intentionally omitted the power to create and operate a bank because a federal bank would tempt Congress to spend money it didn’t have on pet projects not authorized to the feds by the Constitution.
Madison lost the argument. The First National Bank of the United States was formed but went out of existence 20 years later. In 1816, at the end of his second presidential term, Madison had a change of heart and reluctantly signed legislation forming the Second National Bank of the United States. Yet, he never renounced his often-articulated fears of Congress exceeding its constitutional bounds by spending money nowhere authorized in the Constitution.
The Supreme Court on four occasions declined to rule if Madison was correct. Then, in 1936, the court — terrified of FDR’s court-packing threats — ruled that Congress’ taxing and spending powers are essentially unlimited so long as the funds are spent for the common good. If this ruling is correct, then Congress can buy any thing and bribe any person, and the restraints in the Constitution are meaningless.
This misguided ruling unleashed a torrent of federal government spending which has led us to the present tsunami of debt — $28.1 trillion. This is not an issue of Democrats wanting to spend and Republicans wanting the Madisonian approach. To Biden’s proposal of $2.3 trillion, Republicans have countered with offers ranging from half a trillion to $1 trillion.
Recent history shows the bipartisan addiction to debt. George W. Bush borrowed $2 trillion in eight years for the useless war in Afghanistan that Biden just ended. Donald Trump borrowed $2 trillion in four years to pay for tax cuts and to soothe the pain caused by unconstitutional state lockdowns during the COVID-19 pandemic. Yet, what Biden wants is the most massive peacetime transfer of wealth in the history of the world, and none of it is authorized by the Constitution.
That wealth will be received by poor and middle-class folks and wealthy bankers and industrialists, all of whom will be grateful to the Democrats for the short-term cash.
Who will pay for all this?
If Biden’s proposed corporate and capital gains tax increases pass, fewer Americans will be employed as corporations will have less money for new hiring, and investments will suffer as the cost of their fruits will increase. And the post-pandemic economic recovery, once anticipated at the end of the government’s unlawful lockdowns, will not materialize.
Add to this the near-certainty of inflation, and you will have Biden misery visited upon all. Inflation will also raise the cost of government borrowing. That means Biden’s not yet born great-grandchildren, and their unhappy generation, will be paying for Old Joe’s profligate and unconstitutional spending.
That members of both major political parties favor this unbridled borrowing and spending approach to government is unconstitutional and destructive but not surprising. Giving away cash and pushing the cost onto nonvoters — generations as yet unborn — can make members of Congress popular. It can also turn the public treasury into a public trough. Thomas Jefferson warned of the dangers of this as it would become habit-forming for politicians, and voters would grow to expect it.
President Woodrow Wilson borrowed $30 billion to pay for American military involvement in the useless and unjust World War I. American taxpayers are still paying the interest on the $30 billion. It now exceeds $15 billion. Only a government — heedless of basic economics and unfaithful to the plain meaning of the Constitution — would pay a 50% interest rate.
But here we are paying debts that are more than 100 years old and borrowing money as if there were no consequences. How much longer can a society last with a central government that does not pay its bills? Why have a Constitution that limits the government if no person or entity enforces the limitations? Why have taxes in the first place if borrowing and deferring debt will do?
Reprinted with the author’s permission.