By Carl Close • Wednesday April 10, 2013 6:29 PM PDT • 3 Comments
On Wednesday morning President Obama unveiled his 2014 budget and urged the nation to reduce the federal deficit “in a balanced and responsible way.” Predictably, his opponents in Congress are offering a vastly different interpretation of what this sensible-sounding proviso should entail.
Some may even reach across the aisle and succeed in recruiting members of the President’s own party to support their vision of a balanced budget amendment. Before attempting this, however, they would be wise to consult a recent episode of legislative history.
On November 28, 2011, supporters of a balanced budget amendment, House Joint Resolution 2 (HJR2), came close to getting what they wanted—or more accurately, getting what they asked for. The measure garnered support from 62 percent of the House of Representatives, falling just short of the requisite two-thirds vote. It’s a good thing it failed.
An ineffective or poorly written balanced budget amendment would be worse than none at all, and according to economist J. Huston McCulloch (Ohio State University), HJR2 was flawed on several counts. Its passage would have been the triumph of symbolism over substance, not a victory for fiscal discipline.
The first section of HJR2, McCulloch explained in an article published last fall in The Independent Review, was worded so poorly as to make the entire amendment unworkable. But even if that flaw had been absent, the amendment still would have been ineffective because, as McCulloch noted, it lacked provisions to keep members of Congress from threatening to shut down the entire federal government if they didn’t get their way.
But even if that flaw had been absent, there was still the omission of a measure to prevent the Federal Reserve from circumventing the debt ceiling. One provision necessary to make a balanced budget amendment effective, McCulloch argued, is a definition of “outstanding debt” that includes monetary instruments issued by the Fed.
For these and other reasons, McCulloch lambasted HJR2 and offered an alternative free of such flaws, a version he called “the improved balanced budget amendment.”
In the off chance that this blog post will be read by anyone willing and able to help move this matter from the court of public opinion up through the legislative pipeline, I offer McCulloch’s proposed amendment in full:
The Improved Balanced Budget Amendment
SECTION 1. The outstanding debt of the United States shall not be increased above its level on the date of ratification of this amendment, unless three-fifths of the whole number of each House shall provide by law for such an increase by a roll call vote.
SECTION 2. Should the President determine that expenditures appropriated by law will necessitate borrowing in excess of the limit provided in Section 1 during any fiscal year, he or she shall impound any appropriations as necessary and expedient to remain within said limit. The compensation of members of Congress or of judges of the supreme and inferior courts may not be reduced under this provision.
SECTION 3. The limit on the outstanding debt of the United States may be reduced at any time to a level no lower than the then outstanding debt by a majority vote of both Houses of Congress by a roll-call vote.
SECTION 4. Outstanding debt shall include all obligations backed by the full faith and credit of the United States as well as all legal tender obligations and monetary instruments issued by the United States and its agencies. It does not include contingent claims of the United States and its agencies and excludes obligations backed by the full faith and credit of the United States held as backing for legal tender obligations and monetary instruments issued by the United States and its agencies.
Source: An Improved Balanced Budget Amendment, by J. Huston McCulloch (The Independent Review, Fall 2012)
George Santayana once wrote, “Those who cannot remember the past are condemned to repeat it.” Unfortunately, when political representatives repeat fiscal mistakes of enormous magnitude, it is future generations who are condemned to bear most of the burden.
Let’s hope they are the forgiving type.
[For information about The Independent Review, including a free book offer with new subscriptions or renewals, please click here.]