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Open Letter to Rep. Mike Pence

30 November 2010

Rep. Mike Pence (R-IN)
U.S. House of Representatives
Capitol Hill

Dear Rep. Pence:

I applaud your recent speech to the Detroit Economic Club.  Your economic good sense is far too rare on Capitol Hill.  But your proposal for a Spending Limits Amendment – one that would cap federal-government spending at a maximum of 20 percent of U.S. GDP – is dangerous.

The idea is dangerous not because Americans would suffer were government spending as a share of GDP kept permanently lower; quite the contrary.  And it’s dangerous not so much because Congress and the administration would have stronger incentives to move expenditures off-budget.

Your proposed Spending Limits Amendment is dangerous chiefly because of the inevitable need, that you recognize, for express exceptions that would release government from the spending cap – especially the exception that you mention: war.

If your Spending Limits Amendment is ratified, Congress’s and the administration’s incentives to wage war – hot and cold – would intensify.  As Thomas Paine wrote in The Rights of Man, “War is the common harvest of all those who participate in the division and expenditure of public money, in all countries.  It is the art of conquering at home: the object of it is an increase of revenue; and as revenue cannot be increased without taxes, a pretence must be made for expenditures.  In reviewing the history of the English government, its wars and its taxes, a by-stander, not blinded by prejudice, nor warped by interest, would declare, that taxes were not raised to carry on wars, but that wars were raised to carry on taxes.”

Donald J. Boudreaux
Professor of Economics
George Mason University
Fairfax, VA 22030