The Congressional Budget Office forecasts that under current law, federal debt will continue to grow at an unsustainable rate. It will be difficult for the United States to avoid a fiscal cliff and restore sustainable levels of debt.
The debt crisis in this country is not unique. Over the past half-century, every developed country has experienced periods when debt increased more rapidly than national income, exposing the country to increased risk of default. For example, in the late 1980s and early 1990s, Sweden and Switzerland experienced sharp recessions accompanied by unsustainable growth in deficits and debt. Fiscal stress led them to experiment with new fiscal rules designed to constrain debt.
There are several reasons for the success of these countries in enacting new fiscal rules restoring sustainable levels of public debt. The rules apply to a comprehensive budget that includes all expenditures, with specific provisions limiting spending on social security programs.
The rules achieve structural balance by limiting growth in federal spending to long-term growth in national income. The rules are flexible in achieving fiscal balance over the business cycle and in providing for emergency spending, but deficits incurred in a recession must be offset by surplus revenue in periods of economic expansion.
New fiscal rules have since been enacted in a number of countries. With these rules incorporated in their constitutions, the countries have stabilized debt and restored sustainable fiscal policies in the long term. With empowerment by the courts, these countries have removed much of the bias toward deficits and debt in the budget process.
There is a growing consensus on the design of the new fiscal rules. The rules link fiscal policy to fiscal targets. Linking expenditure rules to debt targets is essential for debt sustainability in the long term. Tolerance levels are set for deficits and debt that can trigger more stringent limits on expenditures in the short term. These deficit and debt brakes provide guardrails that prevent fiscal policy from going off track.
These rules are complemented by rules that provide for emergency funds, escape clauses and capital investment funds. With these rules in place, countries not only can achieve debt targets in the long run but also have the flexibility to pursue stabilization policies in response to financial crises and other economic shocks in the short run.
Enacting new fiscal rules in the U.S. faces formidable challenges. Citizens must first recognize that the statutory fiscal rules now in place have failed to solve the debt crisis. Congress has circumvented or abandoned these statutory fiscal rules in the long term. Only with constitutional fiscal rules, enforced by the judicial system, can citizens hope to restore prudent fiscal policy and sustainable debt.
Many resolutions proposing constitutional fiscal rules have been introduced in Congress over the years, but none of these resolutions received the requisite two-thirds vote required to submit the proposed amendments to citizens for ratification. Fortunately, the Constitution provides an alternative route for citizens to amend the Constitution; Article 5 provides that the states as well as Congress can propose amendments.
The Article V Library provides a list of state applications published in the congressional and state records. According to the records, Congress failed its mandate to “call a Convention for proposing Amendments” in 1979, when 39 states had passed “continuing” applications.
Recent legislation introduced by Rep. Jodey Arrington, Texas Republican, would require Congress to fulfill its obligation under Article 5 to certify and count the state applications and call the convention. Mr. Arrington, along with co-sponsors, submitted House Concurrent Resolution 24, which calls for a Fiscal Responsibility Amendment Convention and establishes the archivist’s role in counting Article 5 state applications.
While Mr. Arrington’s resolution has not gained much traction in Congress, private organizations are now working with state legislators in an appeal to the Supreme Court for a declaratory judgment that would require Congress to record and count the state applications.
The outcome of this constitutional battle will have important implications for the future prosperity of the country. If the declaratory judgment succeeds, this will set the stage for an amendment convention in which delegates could design and incorporate a fiscal responsibility amendment in the Constitution.
We should expect citizens to support a constitutional amendment to constrain the fiscal powers of the federal government. A fiscal responsibility amendment may be the only way that the country can avoid a fiscal cliff.
Barry W. Poulson is on the board of directors of the Federal Fiscal Sustainability Foundation.
Reprinted with Permission from The Washington Times – By Barry W. Poulson
The opinions expressed by columnists are their own and do not necessarily represent the views of AMAC or AMAC Action.
Hilarious. Neither political party has shown any desire for fiscal responsibility this century.
There is no indication from either party that this will change after the next election since neither party wants to cut anything from the big budget items. Our National Debt will continue to soar no matter who wins in November.
This idea from Texas Representative Jodey Arrington has the word Responsibility attached to it — and that is something positive to consider — calling for a Fiscal Responsibility Amendment Convention — has a nice ring to it . Best way to not go off a cliff is to keep a proper distance from the edge –that is a common sense matter that involves responsibility . Enacting new fiscal rules ,that idea makes sense ,even though as was stated in the article those rules would face formidable challenges. Well , many things in life involve dealing with formidable challenges and trying to make improvements just needs to be done . Often the unexpected can change circumstances for the better as a result of being diligent in trying to bring about new improvements . Good article Barry — Well done !
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It will require 1) increasing income, 2) reducing expenses or 3) both. Of the three … I would favor reducing expenses across the board … starting with the salaries of each Congressman and Senator due to their failure to manage government expenses like any business is forced to do! In addition, there should be “no increases in salaries” until 100% of the Social Security Trust Fund … borrowed by the Federal Government … to cover their inability to control the Federal Budget! It shouldn’t be what’s good for the Republican Party or what’s good for the Democrat Party … BUT WHAT’S GOOD FOR THE COUNTRY!!! WAKE UP!!!
Writing checks without real money to back it is illegal. No one holds elected officials criminally responsible because they can lie and commit fraud on the taxpayers dime and no one can make them. Ordinary citizens would be prosecuted and sent to jail. Politicians seem to have no accountability because those who write the laws never seem to actually follow them.
Maybe but Sweden and Switzerland turned things around and with the grace of God so can we!
Congress already has all the authority to reduce spending and balance the budget. they don’t need a dangerous constitutional convention to “inspire” them to do it or make it legal for them to do it. If they would abolish all the unconstitutional federal agencies, 80% of spending would go away and the budget would balance immediately. If you don’t do that then the off-budget areas (social security, medicare, govt pensions, etc) would have to be hacked. good luck with that. The real problem was spelled out by G. Edward Griffin in his book The Creature From Jekyll Island: “The American economy is being deliberately exhausted through foreign giveaways, endless wars, and domestic boondoggles. The object is, not to help those in need or to defend freedom or preserve the environment, but to bring the system down.” (page 516) To suggest we call a constitutional convention will play into the conspirators (“deep state” et. al) hands and bring the system down much sooner. I am surprised that AMAC would propose such a threat through this author.
Let’s be realistic. Our federal government is irresponsible fiscally. Case in point…no budget, only “continuing resolutions”, over and over and over ad nauseum.
I follow what this article correctly states, but I also agree with fellow commentor Dan W., who is as skeptical as I am about our nation’s will to maintain a balanced budget. I don’t see that in the cards, though I would certainly prefer it.
The only way this could be fixed is to follow a simple rule Don’t spend more than you make and don’t live on credit. Make do or do without. To try to implement that in today’s DC you might as well try to relocate Everest. Overblown government has an appetite to match and no intention of going on drastically reducing diet
There was a decent chance of balancing the books in the 90s. The Gingrich congress tried to slow the growth of spending. That along with the so called peace dividend offered a glimmer of hope. However, the dems and their media lackeys took to the airwaves accusing the Rs of being mean spirited and in particular, wanting to take away school lunches. The Rs were neutered then. Our hope must lie in a Trump turbocharged economy. To achieve this he will need congressional majorities.
Great article. In addition to destroying our border, the Democrats, with the assistance of the roll over Republicans, have destroyed our dollar. I think it is too late to resurrect it.
I support the COS effort to require a balanced budget. However, 9 more states are needed to be a reality, and time is a critical factor in controlling the $35+ trillion debt. And reality is that the debt service, now nearly $1 trillion, will forever prevent a balanced budget. Worse still, one-half of that debt will mature in the next three years, and the maturing low interest securities will be redeemed. How? By printing new securities at 3-6% interest. Debt service could then be $2 trillion. A 6% GDP will not even prevent a budget deficit, and the debt will continue to grow. The ONLY way to prevent this is to pay down the debt principal to reduce the interest. Period. There is a viable plan. MFS PARIOTIC CAPITALISM is totally compatible with AMAC. We have had discussions and should meet again soon. Together, we can help solve the Debt Crisis. Please call me to renew our discussions, before it’s too late.