Tag Archives: national debt

All Posts, budget, Congress, Constitution, taxes

It’s time to balance budgets

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Although our election decided who will hold public offices, the issues that divide Americans remain unsettled.  Our political battlefield is strewn with social, economic, religious and geographic landmines ready to explode.  And it’s too early to know what a Trump-led Republican administration will be like.  Besides, election “winners” achieve mostly temporary victories because the “losing” side returns to fight another day.

In that unfortunate climate, vital responsibilities of government often go unattended.  Perhaps the best example is our decades-long and increasingly urgent need to balance federal budgets.  The last time we balanced our budget for more than two consecutive years was the eleven year period from 1920 through 1930.

If both conservative and liberal voters push for it, this might be a time when we could pass a constitutional amendment requiring a balanced budget.  With that in mind, here’s my Balanced Budget Amendment idea.  It would force decisions on some issues that divide us, most notably taxes, health care and defense spending – maybe even uniting conservatives and liberals in support of practical ideas.  Here is the concept:

IDEAS FOR A BALANCED BUDGET AMENDMENT

The President must propose a balanced budget to the congress at least five months before the beginning of each fiscal year.

  1. Congress must pass a balanced budget and send it to the President for signature at least three months prior to the beginning of each fiscal year.
  2. If the President vetoes a budget approved by the congress, the president and the congress must confer, agree to and sign a budget at least 30 days prior to the beginning of each fiscal year.
  3. Failure of a President to meet the responsibilities described above on a timely basis constitutes voluntary resignation from the office of the presidency.
  4. Failure of the Congress to meet its responsibilities described above on a timely basis constitutes ninety day notice of resignation from office by all members of the congress. Each state will elect new members of congress within 60 days to take office 30 days later.
  5. A balanced budget must include all projected expenses plus any unplanned deficit from the prior year and retirement of at least one percent of existing national debt.  It must also include projection of sufficient tax revenue to fund the budget.
  6. An unbalanced budget with expenses exceeding revenue is permissible during a  time of war or other national emergency declared by the congress and approved by the President.  An unbalanced budget requires approval by sixty percent of the members of each house of congress.
  7. Trust Fund programs operated by the Federal Government which have their own dedicated revenue streams may accumulate surpluses and loan them to the Federal Budget at the discretion of the Congress and the President.  Timely repayment of such debt is the highest priority claim on federal revenue.  (Social Security is the main program of this kind.)

The specific language and content of constitutional amendments requires extreme care and scrutiny.  I’ve only tried to describe principles for an amendment, not the exacting language that would be needed.

My prediction is that it will be difficult to get legislators from either political party to consider an amendment because few, if any, are willing to make the decisions required to balance budgets. Facing a deficit, legislators from both parties are generally more willing to raise the debt ceiling than to raise taxes or cut spending.

After all the partisan shouting is done, the necessary compromises usually involve increasing our debt.  The burden is borne by voters and taxpayers.  With this amendment, if officeholders fail, they lose their jobs to someone who is willing to actually do the work.  Holding new elections to replace a failing legislature is not a radical idea. Numerous parliamentary democracies do exactly that.

This column lays out an ambitious vision for solving an urgent national problem.  It’s a good first step toward more effective government because it will also force more responsible decisions on all other federal priorities.

Is it unrealistic to think that our congress, president and voters would actually do this?  Maybe…  But if congress is unable to balance a budget, how can they expect to find success on other contentious questions like immigration, health care, war and civil rights that sit atop their agenda?

If we can’t make such decisions, our future as a viable nation is in doubt.  Let’s get started.

All Posts, budget, Congress, deficit, taxes

NEW IDEAS FOR A BALANCED BUDGET AMENDMENT

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Our elected officials in Washington congratulate themselves for avoiding a government shutdown and argue about which non-budgetary legislation to tack onto “must-pass” short term spending bills while we limp from month to month with no long range financial plan .  This column is my attempt to persuade readers of all political stripes that we should pass a constitutional amendment requiring a balanced budget – not because I like the idea but because nothing else seems to work.

First, a dose of reality – Social Security is not the problem.  In 66 of its 77 years Social Security has brought in more money than it spent. That includes the most recent 34 consecutive years.  Because we are living longer and have the large baby-boom generation retiring, Social Security will need some combination of delayed retirement, increased taxes, and reduced benefits; but if congress will act soon, the changes will not be massive.

The real problems are in other areas of the budget.  Our deficit for 2015 was $439 billion despite a $19 billion surplus by Social Security.  Historical data from the US Office of Management and Budget show only two recent balanced budgets: 1999 and 2000 (President Bill Clinton’s last two years).  Prior to that it was 1960, the last year of President Eisenhower’s term.  We have had budget deficits for 53 of the last 55 years and our Congress seems more interested in cutting taxes and increasing spending than in balancing budgets.

Federal spending prior to WWII was typically 10% or less of the value of all the goods and services produced in the nation (GDP).  Since then the US has emerged as a world military power and has developed our social safety net.  As a result, Federal spending has been about 17-20% of GDP since 1975.    Data from the Federal Reserve Bank demonstrate that our serious debt problems emerged in the early 1980s when the Reagan Administration began cutting taxes for corporations and the wealthy without cutting spending.  Historical data from the Office of Management and Budget show that deficits became consistently large around the same time.  Total tax collections have actually remained fairly stable at 17-19% of GDP but the corporate share has been cut in half and capital gains taxes have been reduced while payroll taxes increased.

That is the background information.  Here are some ideas for a constitutional amendment:

  1. Congress is required to pass a budget and establish taxes to fund the budget for periods of time that are not less than one year.  The budget and taxes must be passed and sent to the President at least three months prior to the effective date.
  2. If the congress fails to pass a budget on time there will be a new election 90 days later to replace the entire congress.  The prior year’s budget and taxes will be automatically extended for one year or until they are changed by the new congress.
  3. The debt of the nation is limited to the sum of values of trust funds established by the congress (Social Security for example).
  4. The requirement to balance each budget may be waived during a state of emergency declared by a 60 percent majority of both houses of Congress.  The declaration is valid for not more than one year but can be renewed as many times as the Congress thinks necessary.
  5. At any time when there is no declared state of emergency, 2% of non-trust fund tax revenues will be set aside for reduction of excess debt.

The amendment will:

  1. Force the Congress to do its job.
  2. Protect Social Security and other trust funds that provide pre-paid benefits.
  3. Allow enough flexibility to deal with genuine emergencies and wars.
  4. Gradually pay down existing debt.

The amendment would force serious debate about priorities.  We will be less likely to go to war if we have to raise taxes for it.  There will be more pressure to eliminate wasteful spending and tax loopholes.  There will be pressure to raise taxes for infrastructure, research, and human services.

I was taught in high school that “Economics is the science of meeting unlimited human wants with the limited resources available.”  A balanced budget amendment will require our government to help us do exactly that.