A Constitutional Fix For Fiscal Disorder

The days when elected officials governed by the principle that “there is no dignity quite so impressive and no independence quite so important as living within your means” are long forgotten. During Calvin Coolidge’s presidency, the debt-to-GDP ratio fell to its lowest levels in the past century, below 20%. Today, the ratio is over 98% and rising rapidly. Projected shortfalls for social insurance programs alone exceed $65 trillion under current law; annual deficits have approached $2 trillion.

Amid these deepening fiscal issues, the House of Representatives recently rejected a balanced-budget amendment (BBA) to the Constitution introduced by Arizona Republican Rep. Andy Biggs. While it would be unpopular among the political elites, a well-designed BBA could help to restore sound fiscal governance before crisis arrives.

Congress has raised the statutory debt ceiling 78 times since 1960. Likewise, spending caps and automatic cuts meant to constrain budget deficits proved ineffectual, except in 2013. Statutory controls are deficient in their design: Congress retains the power to waive or repeal them. But lawmakers would not circumvent a constitutional amendment as easily.

Although its constitutional language would bind lawmakers to shrink the bloated budget, a well-crafted BBA would not eliminate their discretion in how to do it.

A BBA ought to embody enduring principles for fiscal continence. Instructions on what spending to cut and by how much, or what automatic enforcement mechanisms to adopt, do not belong in constitutional law. The text should be the opposite of a procedural manual, it should be broad and concise, providing standards to which Congress must adhere while not micromanaging implementation.

Failed BBA proposals have often been written in an overly prescriptive way. Beyond that, most also required an annually balanced budget. Yet year-to-year federal revenue and spending fluctuate, often significantly. For example, tax revenue declines during recessions, while many federal programs expand automatically as more people become eligible. A Procrustean annual balanced-budget requirement would invite chronic instability and tempt lawmakers into accounting tricks more than it would impose fiscal discipline.

At the opposite extreme, BBAs that spared the leading sources of structural deficits — namely Social Security and Medicare — would balance the budget in name only. To curb unsustainable deficits, a BBA would have to touch “the untouchables.”

Kurt Couchman, senior fellow in fiscal policy at Americans for Prosperity, devised a principles-based BBA to correct past mistakes. Its basic premise, as Couchman puts it, “is simple and concise: [it would] balance the budget, except during emergencies, and have a reasonable glide path to reach balance.” Additionally, it would exclude interest payments from the balance rule, easing both political objections to a BBA and the need for austerity measures.

By permitting that budget balance “may occur over more than 1 year,” a principles-based BBA would leave the mechanics of medium-term balance to later debate. The model adopted could be, among others, a business-cycle rule tying spending to a rolling average of recent revenue adjusted for population and inflation or a Swiss-style alternative that allows deficits in downturns but requires surpluses in good times.

The principles-based BBA would permit a waiver of the balanced-budget requirement for any exigency approved by two-thirds of both chambers, provided “debts incurred from such expenditures shall be paid as soon as practicable.” The amendment would thus defer to Congress in deciding which emergency, war, or recession warrants a waiver.

Designing and refining BBA-implementing legislation would be arduous. It would take time to formulate suitable entitlement reform — let alone close a $1 trillion primary deficit. Couchman’s BBA would, therefore, afford a time horizon before the rule comes into force: “within 10 years following the date of the ratification.” Because Congress legislates on timelines that span years, rushing the process would either end in a terminal impasse or produce subpar policy.

President Coolidge would advise lawmakers today: “There is only one form of political strategy in which I have any confidence, and that is to try to do the right thing and sometimes to succeed.” With the national debt now past the $39 trillion, a congressional response to untamed debt growth is overdue — and a BBA offers lawmakers a place to start.

Vladlena Klymova is a policy analyst at the Taxpayers Protection Alliance.