by Nick Dranias
Nearly twenty years ago, on May 23, 1994, President Ronald Reagan wrote a personal letter to Lew Uhler of the National Tax Limitation Committee lamenting the then-latest failed attempt by Congress to propose a Balanced Budget Amendment:
We can’t depend on Congress to discipline itself, as House and Senate leaders have once again demonstrated in rejecting a balanced budget amendment . . . . it is clear that we must rely on the states to force Congress to act on our amendment. Fortunately, our Nation’s Founders gave us the means to amend the Constitution through action of state legislatures, which you have been wisely pursuing . . . . That is the only strategy that will work . . . . Unless we act and act quickly, the people in the White House and those running Congress will bankrupt America.
What Reagan was referring to was the manifest need for state legislatures to advance a Balanced Budget Amendment by exercising their power under Article V of the U.S. Constitution to apply to Congress for a convention for proposing constitutional amendments. As observed by James Madison in Federalist No. 43, Article V gives the states the same power as Congress to originate constitutional amendments. Now that Washington has kicked the can yet again instead of fixing the debt—and President Obama’s administration has made it clear that it prefers having no debt limit at all—isn’t it time to take President Reagan up on his recommendation?
After all, unlike any prudent household, Washington simply refuses to balance its budget. Washington has become so addicted to borrowing money that the outstanding national debt exceeds $16.5 trillion. Our outstanding national debt now exceeds 100% of Gross Domestic Product, a figure not seen since World War II, and it is heading to 200% in the near future. The 2012 federal fiscal year operating deficit was $1.1 trillion. For the fourth fiscal year running, Congress has failed to pass an annual federal budget under which to operate our country.
As Reagan knew too well, the solution to our national debt problem will not be found in Washington. The country faces an overconcentration of power to incur unlimited debt that is too easily leveraged by special interests to enrich themselves at the expense of current and future generations. No matter which party is in control, Congress has been borrowing trillions of dollars from future generations, whose voices cannot be heard, to shower money on special interests who dominate Washington.
The definition of insanity is doing the same thing over again under the same circumstances and expecting different results. For decades, Americans have tried to reform the political class in Washington by replacing one candidate with another or one party’s dominance with that of another. The problems facing our country have only continued to grow. Washington will never control its addiction to debt. It is time for the People, acting through their state representatives, to intervene and save our future.
The Compact for America makes it possible for the states to fix the debt in the near future. Using an agreement among the states, the Compact for America invokes Article V of the United States Constitution to advance a powerful Balanced Budget Amendment. The proposed BBA would require a majority of State legislatures to approve any increase above an initial debt limit. In other words, state legislatures would provide oversight and intervention as the nation’s board of directors when it comes to requested increases in the federal debt.
This BBA is designed to force Washington to balance its budget or prepare a budget to make the case for more debt long before the midnight hour arrives. It would require the President to start designating spending cuts when spending exceeds 98% of the debt limit. Congress must then override those cuts within 30 days with alternatives if they disagree. In short, the proposed BBA would force both the executive and legislative branches to show their cards before hitting a hard debt limit, protecting our country’s credit rating from being held hostage to a game of political chicken.
The BBA also recognizes that our national debt is primarily a spending problem. It requires any new or increased income or sales tax to secure two-thirds approval of both houses of Congress. But the amendment allows for simple majority approval of increases in tax revenue that result from ditching the income tax code in favor of a sales tax or reducing or eliminating tax exemptions, deductions and credits. Any new tax burden would only result from making our tax code flatter, fairer and far more conducive to economic growth—which is the best way to prevent both debt spending and tax increases.
With the states serving as an active board of directors for our wayward federal executive and legislative branch “CEOs,” the Compact for America’s BBA would powerfully check and balance Washington’s debt addicts.
Some may question whether the states should have a voice in the national debt debate; but the states should have a voice for the same reason that the U.S. Constitution originally gave state legislatures control over the U.S. Senate. A centralized authority should not have a free hand in determining—or mortgaging—the future of every community in the nation. Moreover, if the case can be made to a majority of state legislatures that the federal government should borrow more money, then the BBA will allow such borrowing. The state debt approval requirement creates flexibility for the federal government to finance justifiable wars and to address genuine crises without easily exploited loopholes–so long as a genuine geographical consensus supports the action.
The 30 states that are currently resisting Medicaid expansion illustrate just how powerful this BBA could be. Already 18 states have rejected Medicaid expansion and 12 are on the fence. It is increasingly likely that a simple majority of states will essentially veto $600+ billion in debt spending on an issue that is the quintessential federal bribe to grow government. This is powerful confirmation that concentrated power in Washington is the root cause of the federal debt problem and a rejoinder to anyone who thinks decentralizing power over federal debt policy would only make things worse. The bottom line is that the grassroots dominate state capitols in a way that they never can possibly dominate Washington. If the American people can beat the powerful health care lobby and the emotional arguments used to sell Medicaid expansion, they will certainly tend to prevail in the more abstract and principled debate in state capitols over whether to increase the federal debt.
In short, the Compact for America advances a uniquely powerful BBA. An interstate compact—which is simply an agreement among the states—provides the vehicle for delivering this crucial reform because it transforms the state origination of a Balanced Budget Amendment into a “turn-key” operation that will cut the time and resources needed by more than 60%. It does this by consolidating all of the state legislation involved in the Article V amendment process—from the requisite 34 state applications to Congress, to the dozens of necessary delegate appointments and instructions, to the selection of the convention location and rules, to the ultimate ratification of the BBA by 38 state legislatures. By fully defining and regulating the Article V process, the Compact also eliminates any reasonable possibility of a “runaway convention.”
Specifically, the Compact includes sixteen interlocking safeguards that compel all member state delegates to follow convention rules that limit the convention agenda to an up or down vote on the BBA and to return home if those rules fail to hold. It prohibits member states from expanding the scope of the convention, violating the convention rules, or ratifying anything other than a BBA. It expressly nullifies any proposal or action of the convention that deviates from its limited agenda and rules.
These state-imposed limitations are fully enforceable based on the default premise of the Constitution, as expressed by the Tenth Amendment—“[t]he powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.” Because nothing in Article V prohibits the states from directing and regulating the convention process, nor delegates such power to the federal government, all such power was retained by the States. In other words, there is every reason to take Alexander Hamilton at his word in Federalist No. 85, where he promised that, “We may safely rely on the disposition of the State legislatures to erect barriers against the encroachments of the national authority” using their power under Article V.
In short, the Compact for America is just the sort of powerful, yet pragmatic vehicle for fiscal reform that could only be originated outside of Washington—and if we truly want to restore the Republic, it must be deployed.
More than any other policy, unlimited debt is the source and enabler of an ineffective, overstretched and overreaching federal government. This is because unlimited debt creates the illusion of limitless resources; and when the illusion of limitless resources exists, it becomes next to impossible to persuade politicians that the federal government should have a limited and sustainable role in our lives. Throttling back limitless debt spending and imposing immediate scarcity on debt is the only way to create a structure that forces a debate over the proper priorities and sustainable functions of the federal government that will otherwise be easily evaded–until it is too late. Only the Compact for America gives us a real shot at imposing systemic restraint on debt-fueled federal overreach.
Let’s seize the wheel using the ultimate power states enjoy over the federal government. It’s now or never.
Nick Dranias is Director of Policy Development and Constitutional Government for the Goldwater Institute
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