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CAPITALISM:
A Treatise on Economics

by
George Reisman


The Clearest and Most Comprehensive Contemporary Defense of the Capitalist Economic System Available

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Literature and Lectures by Edith Packer, George Reisman, and Others



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The Line-Item Veto Is A Bad Idea*

By

George Reisman**

(February 14, 1998)

Federal-District Judge Thomas Hogan has done exactly the right thing in finding the line-item veto to be unconstitutional. It is. Closely connected with its unconstitutionality is the fact that it would inevitably defeat the purpose of its supporters, which is to restrain Congressional spending. For it places the President in a position in which he can bargain with the members of Congress with respect to which items he will exercise the line-item veto or not exercise it. Remarkably, hardly anyone seems to have realized that this must put the President in the position of being able to join four-square in the Congressional pork-barrel and log-rolling process himself. In exchange for not exercising the line-item veto power over the pet projects of Congressmen, the President can demand the inclusion of his own pet projects in appropriation bills. In effect the line-item veto power thereby grants the President implicit legislative powers. This is clearly not the way to restrain Congressional spending; indeed, in the long-run it can only increase it

The problem of runaway Congressional spending is a serious one and it demands a serious solution, not a self-defeating gimmick. How far we are from a real solution becomes clear almost as soon as the real solution is named, for in the in the very next instant it is almost certain to be rejected out of hand, as simply unthinkable. That solution, as the late Ludwig von Mises showed, is the adoption of a full-bodied gold standard, with practically all of the gold in the physical possession of the citizens. Under such a monetary system, Congress and the government are made financially dependent on the citizens. The only money they can spend is money obtained from the citizens. Under such a gold standard, government spending is automatically limited by the physical limitation of the money available to the government from the people.

Under today's system, in contrast, Congress and the government are not limited to spending money that is obtained from the citizens. Through the instrumentality of the Federal Reserve System, they have the power to create new and additional money, virtually out of thin air. This power is what has removed the restraints on government spending and created the problem of chronic budget deficits. It is what has created the delusion that the government can support and enrich the people. For it has made the government literally into a source of money to the people. To control government spending, the government must be deprived of the ability to create money and thus of any source of money other than what it can obtain from the citizens, through taxes. Then, because it will be clear who supports whom, and who must pay for all government spending, it will be far more difficult to gain support for government spending and the problem will be brought under control.

To put all this another way, what we need to do to control government spending is not to further destroy the United States' Constitution, by upsetting the balance of powers between the Legislative and Executive branches, but to reinstate the vital portion of the Constitution that upholds the gold standard and thereby serves to limit government spending and thus the power of the government.


For further reading on this subject, see:

Ludwig von Mises, The Theory of Money and Credit (Irvington-on-Hudson, New York: The Foundation For Economic Education, 1971)  Part IV, "Monetary Reconstruction," pp. 413-457.

George Reisman, Capitalism: A Treatise on Economics (Ottawa, Illinois: Jameson Books, 1996), pp. 927-928, 951-963.

George Reisman, "Only A Gold Dollar Will End Deficits."


*Copyright © 1998 by George Reisman. All rights reserved.

**George Reisman, Ph.D., is professor of Economics at Pepperdine University’s Graziadio School of Business and Management and is the author of Capitalism: A Treatise on Economics (Ottawa, Illinois: Jameson Books, 1996). 

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